Treasuries Extend Yesterday's Surge As Retail Sales Drop More Than Expected

(RTTNews) - Treasuries moved higher during trading on Friday, extending the strong upward move seen over the course of the previous session.

Bond prices advanced early in the session and remained firmly positive throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.3 basis points to 4.472 percent.

The ten-year yield added to the 11.2 basis point plunge seen on Thursday, pulling back further toward its recent one-month lows.

The continued strength among treasuries came after the Commerce Department released a report showing retail sales slumped by much more than expected in January.

The report said retail sales slid by 0.9 percent in January after climbing by an upwardly revised 0.7 percent in December.

Economists had expected retail sales to edge down by 0.1 percent compared to the 0.4 percent increase originally reported for the previous month.

Buying interest was somewhat subdued, however, as economists noted the sharp decline was largely due to extreme wintery conditions and the California wildfires.

A separate report from the Federal Reserve showed industrial production rose by more than expected in January, although the increase was largely due to a weather-related surge by utilities output.

The Fed said industrial production climbed by 0.5 percent in January after jumping by an upwardly revised 1.0 percent in December.

Economists had expected industrial production to rise by 0.3 percent compared to the 0.9 percent advance originally reported for the previous month.

"Retail sales will likely recover in coming months as Californians pick up the pieces and as winter weather affects the Midwest and East Coast less," said Bill Adams, Chief Economist for Comerica Bank.

"Similarly, the industrial production report was choppy in January with obvious weather effects boosting utilities demand and weighing on mining and manufacturing," he added. "These short-term fluctuations will fade quickly."

Following the Presidents' Day holiday on Monday, the U.S. economic calendar is somewhat quiet next week, although traders are still likely to keep an eye on reports on some housing and regional manufacturing data along with the minutes of the latest Federal Reserve meeting.