Treasuries Move Sharply Lower Following Upbeat Retail Sales Data

Treasuries showed a substantial move to the downside during trading on Monday, as strong U.S. retail sales data added to concerns about the outlook for interest rates.

Bond prices regained some ground after falling sharply in early trading but remained firmly negative. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 12.9 basis points to 4.628 percent.

With the significant increase on the day, the ten-year yield ended the session at its highest closing level in five months.

The sell-off by treasuries came after the Commerce Department released a report showing much stronger than expected U.S. retail sales growth in the month of March.

The Commerce Department said retail sales climbed by 0.7 percent in March after advancing by an upwardly revised 0.9 percent in February.

Economists had expected retail sales to rise by 0.3 percent compared to the 0.6 percent increase originally reported for the previous month.

Excluding a pullback by sales by motor vehicle and parts dealers, retail sales jumped by 1.1 percent in March after climbing by 0.6 percent in February. Ex-auto sales were expected to rise by 0.4 percent.

The data added to recent concerns the Federal Reserve will hold off on lowering interest rates, with CME Group's FedWatch Tool indicating just a 21.6 percent chance of a quarter point rate cut in June.

"The robust gain in retail sales in March followed by upward revisions in the prior two months shows the consumer continues to power the overall economy forward," said Nationwide Chief Economist Kathy Bostjancic.

However, she added, "The lack of moderation in consumer spending and inflation will undermine Fed officials' confidence that inflation is on a sustainable course back to 2% and likely delays rate cuts to September at the earliest and could push off rate reductions to next year."

Reports on housing starts and industrial production may attract attention on Tuesday along with remarks by Fed Chair Jerome Powell.

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