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Bond Report: 10-year Treasury yield tumbles most since November despite blowout retail sales report

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U.S. Treasury yields slumped Thursday, even after a raft of better-than-expected data showed the strength of the American consumer who is benefitting from direct payments to households by Congress and an accelerating vaccine rollout.

What are Treasurys doing?

The 10-year Treasury note yield
BX:TMUBMUSD10Y
fell 10.6 basis points to 1.531%, the lowest in four weeks, and marking its biggest daily drop since early November. The 2-year note rate
BX:TMUBMUSD02Y
was down 0.8 basis point at 0.155%, while the 30-year bond yield
BX:TMUBMUSD30Y
slid 11.5 basis points to 2.210%, booking its biggest daily drop since mid-February.

What’s driving Treasurys?

Long-dated Treasurys looked past the rush of improving data that highlighted the growing momentum behind the U.S. economy. Analysts suggested bond traders may have discounted the news, as many already had been expecting an improvement in economic indicators during the spring.

See: Yields are sliding but U.S. economic indicators are improving. Here’s what’s driving the bond market ‘datapathy’

The highlight of Thursday’s economic data was retail sales figures for March, which surged 9.8% to mark the second-biggest monthly increase on record.

Meanwhile, initial jobless claims fell to a pandemic low of a seasonally adjusted 576,000 from 769,000 in the prior week.

Investors also saw some key data from U.S. factories. Industrial production rose 1.4% in March, while factory indexes for New York state and Philadelphia jumped in April.

What did market participants say?

“I thought the market had front-run the Fed way too much and there was overconfidence that inflation would come and then, at some point, the Fed would react,” said Tom Graff, head of fixed income at Brown Advisory, in an interview.

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