Treasury Yields Inch Up Ahead of Fed Statement

Investors are digesting data on retail sales and look for update on plan to wind down bond-buying program.

Sales at US retail stores, online sellers and restaurants rose by a seasonally adjusted 0.3% in November from the previous month, the Commerce Department reported.

US government bond yields edged higher Wednesday, with investors weighing new retail-sales data ahead of the conclusion of the Federal Reserve’s two-day policy meeting.

In recent trading, the yield on the 10-year US Treasury note was 1.445% compared with 1.437% Tuesday.

Yields, which rise when bond prices fall, briefly dropped in early-morning trading after the Commerce Department reported that sales at US retail stores, online sellers and restaurants rose by a seasonally adjusted 0.3% in November from the previous month.

That was below the 0.8% increase forecast by economists surveyed by The Wall Street Journal. Sales excluding autos were also less than expected. Typically, weak economic data boosts demand for Treasury bonds by reducing investors’ expectations for economic growth, inflation and short-term interest-rate increases set by the Fed.

Yields, though, quickly recovered after the report, which was accompanied by better-than-expected data on New York state manufacturing activity. The Fed meeting also loomed over trading, giving investors reason to look past the new economic data.

Investors are looking for a few major outcomes from the meeting. Those include an update on the central bank’s plan to wind down the bond-buying program it started last year to improve market functioning and stimulate the economy following the onset of the coronavirus pandemic.

Investors are also prepared for changes to officials’ interest-rate projections. Many expect that a majority of officials will support multiple rate increases next year. Officials were evenly split in September over whether to raise rates at all before 2023.

Though investors have sold short-term Treasury bonds in anticipation of rate-increases next year, they have largely kept buying longer-term bonds in the belief that the central bank won’t be able to raise rates very high before slowing the economy and being forced to stop. In recent weeks, the emergence of the Omicron Covid-19 variant has also weighed on economic sentiment, providing a further drag on yields.