By Matt Wirz
The whiplash seizing the Treasury market continued Friday as U.S. government bond prices headed for a fifth consecutive session of declines after the Commerce Department said that retail sales rose 0.4% last month.
The better-than-expected economic news pushed yields on the 10-year bond as high as 1.869%, according to Tradeweb, up from 1.789% Thursday and 1.466% at the start of the month.
Traders said they're selling Treasurys based on optimism about U.S. economic growth and a thaw in U.S. trade talks with China. But the velocity of recent price moves highlights how fickle market sentiment has become because of uncertainty in domestic politics, international trade and the state of the global economy. Bond yields rise when prices fall.
Investors are also repositioning ahead of the Federal Reserve Board meeting next week, said Maryann Hurley, a bond trader at D.A. Davidson & Co.
"I'm not expecting an overly dovish statement to come out on Wednesday," she said.
Bond yields dropped in August, after concerns slowing economic growth -- and about President Trump's demands for steep rate cuts -- raised the possibility that the Fed might cut rates by as much as half a percentage point this month. The consensus now holds that a quarter-point reduction is most likely.
Sharp as the rise in Treasury yields has been in September, it looks ho-hum compared with the half-percentage-point drop in 10-year yields that took place in the first two weeks of August. The severity of the moves in both directions implies that investors are trading more on momentum than on fundamental economic forecasts and can easily be swayed to change their minds, some analysts said.
"Given how fast we went down in yield, some of the weaker longs are getting shaken out now," Ms. Hurley said
Falling Treasury prices dragged down most corporate bonds in lockstep, but debt of bankrupt California electric utility PG&E Corp. rose on the announcement of an agreement between the company and one of its largest creditor groups. PG&E's 6.05% bond due 2034 traded at 110.13 cents on the dollar Friday, up from around 108 before the deal was disclosed, according to data from MarketAxess.
Creditors with $20 billion of wildfire insurance-related claims against the company reached a proposed $11 billion settlement in the hopes that it would speed the conclusion of the bankruptcy case, according to a statement by a group representing the insurers.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, rebounded slightly Friday to 91.07 from an earlier low of 90.99, after the retail sales figure came out above the 0.2% predicted by economists in a Wall Street Journal survey. The index finished Thursday at 91.26.
Write to Matt Wirz at email@example.com