Strong retail sales figures propel U.S. Treasury yields to two-year high

Market anticipation builds as Powell prepares to speak on Thursday
Strong retail sales figures propel U.S. Treasury yields to two-year high
The 10-year Treasury yield surged by up to 0.15 percentage points to reach 4.85 percent

Robust U.S. retail sales data injected new momentum into global bond sell-off, leading to a 17-year high in short-term Treasury yields.

The two-year Treasury yield, tracking interest rate expectations, surged by 0.09 percentage points to reach 5.20 percent, marking its highest level since 2006.

Read more: Global bond market in state of turmoil amid lingering monetary tightening

The 10-year Treasury yield, a key indicator of global financial assets, surged by up to 0.15 percentage points to reach 4.85 percent, nearing a recent 16-year high. The sharp increase was driven by apprehensions surrounding “longer” interest rates, causing turbulence in global debt markets.

Bond hiatus ends

Resumed sales bring an end to a bond hiatus observed over the past week, as the outbreak of conflict between Israel and Hamas escalates demand for secure assets like treasury bonds.

September’s U.S. retail sales surpassed analysts’ expectations, as indicated by a 0.7 percent increase reported by the Department of Commerce. This robust performance adds to the ongoing streak of positive economic data.

Despite ongoing pressure on consumers leading to erosion of their savings, U.S. retail sales experienced a rise. Observers attribute this increase in spending to a strong labor market and wage growth, which have provided support to consumers.

Fragmentation data

According to analysts, the rise in fragmentation data within the U.S. can be largely attributed to the upper middle-class segments. In contrast, other income classes may face challenges related to debt accumulation and impairment. These challenges could stem from low income levels or a sudden surge in interest rates, which have increased the cost of household debt.

Credit card delinquencies

Credit card delinquencies have reached an 11-year high, reflecting a growing reliance of American consumers on credit cards to fund their purchases.

As October commenced, millions of American students recommenced their student loan payments, estimated by economists to amount to approximately $70 billion. This figure represents around 0.3 percent of their disposable personal income.

Powell’s remarks

Federal Reserve Chairman Jerome Powell is scheduled to deliver a speech at the Economic Club in New York on Thursday. Market participants anticipate that his remarks may provide valuable insights into the thinking of officials leading up to the upcoming central bank meeting in two weeks.

Upward trend

European government bond yields followed the upward trend observed in U.S. Treasury bonds. German ten-year bond yields, serving as the borrowing benchmark for the eurozone, increased by 0.1 percentage points to reach 2.88 percent. Similarly, Italian yields rose by 0.16 percentage points, reaching 4.92 percent.

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