After ending the previous session roughly flat, treasuries moved to the upside over the course of the trading day on Thursday.
Bond prices fluctuated early in the day but climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.3 basis points 3.450 percent.
Treasuries benefited from their appeal as a safe haven, as a batch of disappointing U.S. economic data added to concerns the Federal Reserve’s aggressive interest rate hikes will push the economy into a recession.
Early in the day, the Commerce Department released a report showing retail sales pulled back by more than expected in the month of November.
The Commerce Department said retail sales slid by 0.6 percent in November after surging by 1.3 percent in October. Economists had expected retail sales to edge down by 0.1 percent.
Excluding a steep drop in sale by motor vehicle and parts dealers, retail sales slipped by 0.2 percent in November after jumping by 1.2 percent in October. Ex-auto sales were expected to inch up by 0.2 percent.
A separate report released by the Federal Reserve unexpectedly showed a modest decrease in U.S. industrial production in the month of November.
The Fed said industrial production slipped by 0.2 percent in November after edging down by 0.1 percent in October. Economists had expected industrial production to inch up by 0.1 percent.
The unexpected dip in industrial production came as manufacturing output fell by 0.6 percent and mining output slid by 0.7 percent.
Meanwhile, a 3.6 percent spike in utilities output helped limit the downside amid unseasonably cold weather across much of the country.
Separate reports from the New York and Philadelphia Federal Reserves also showed contractions in regional manufacturing activity in the month of December.
“The 0.6% m/m falls in retail sales and manufacturing output in November suggest that the economy has lost some serious momentum, with the resilience of consumers to much higher interest rates starting to crumble,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.
He added, “Solid gains in previous months mean real consumption growth should still be strong in the fourth quarter as a whole, but we expect the economy to slip into a mild recession in the first half of next year as the Fed’s relentless hawkishness takes its toll.”
Following the avalanche of U.S. economic data this morning, the economic calendar is relatively quiet on Friday, potentially leading to choppy trading.
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