Consumers aren’t opening up their wallets
NEW YORK (MarketWatch) — Treasury prices retreated Friday as investors pushed into riskier assets after a surprise easing measure by the Japanese central bank.
The Bank of Japan said Friday that it would quicken the pace of its purchases of Japanese Government Bonds as it fights a falling inflation rate. So-called quantitative easing measures tend to have the effect of encouraging investors to buy riskier securities like stocks.
As equities surged across the globe Friday, investors left the perceived safety of U.S. government debt. The moves in Treasurys underscored a broader shift in the market.
“I think what we continue to see is that interest-rate markets have become global in that cross-economy impacts are becoming greater,” said Scott Kimball, portfolio manager at Miami-based Taplin, Canida & Habacht, a unit of BMO Global Asset Management.
The 10-year Treasury note 10_YEAR, -0.13% yield, which rises as prices fall, was up 3 basis points on the day at 2.337%. The yield closed at its highest level in three weeks. It rose 6.5 basis points on the week but fell 17 basis points on the month, according to Tradeweb.
The market also focused a few key data points on Friday:
- Consumers cut spending by a seasonally adjusted 0.2% in September, more than economists had expected.
- Inflation, as measured in the personal consumption expenditures index, rose 0.1% in September, with the annual rate matching last months’ reading of 1.4%. That’s still well below the Federal Reserve’s inflation target of 2%.
- The employment cost index rose 0.7% in the third quarter, suggesting that businesses are facing rising labor costs. Wages climbed by 0.8%.
- The Chicago purchasing-managers index rose to a one-year high in October.
- A consumer sentiment indicator rose to 86.9 this month.
Despite a sharp drop in yields in mid-October, which briefly pushed the 10-year note below 2%, the market retraced most of those moves. Given concerns about where interest rates are headed, yields could be poised to rise next month.
“November appears to be setting up for a re-run of the early September sell-off in bonds that was short-lived, but nonetheless aggressive as it unfolded into mid-September,” said Richard Gilhooly, U.S. director of interest-rate strategy at TD Securities, in a note.