Treasuries Give Back Ground Ahead Of Fed Announcement

(RTTNews) - Following the upward move seen over the course of the previous session, treasuries moved back to the downside during trading on Tuesday.

Bond prices moved modestly lower early in the session and remained in the red for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 2.1 basis points to 3.642 percent.

With the increase on the day, the ten-year yield rebounded after ending Monday's trading at its lowest closing level in over a year.

The pullback by treasuries came following the release of a Commerce Department report unexpectedly showing a modest increase by U.S. retail sales in the month of August.

The Commerce Department said retail sales inched up by 0.1 percent in August after surging by an upwardly revised 1.1 percent in July.

The uptick surprised economists, who had expected retail sales to dip by 0.2 percent compared to the 1.0 percent jump originally reported for the previous month.

The data is seen as reducing the likelihood the Federal Reserve will lower interest rates by 50 basis points when announcing its highly anticipated monetary policy decision on Wednesday.

"Despite a lot of concern about the health of the US consumer, the latest data shows resilience rather than the kind of weakness that would warrant a big opening gambit from the Fed," said Danni Hewson, head of financial analysis at AJ Bell.

She added, "A 50 basis point cut might be perceived as worry, an indication that they've waited too long to change tack, whilst a slow and steady unwinding suggests control and is less likely to be viewed through a political lens."

The Federal Reserve also released a separate report showing industrial production in the U.S. rebounded by much more than anticipated in the month of August.