U.S. Treasury prices pulled back from overnight lows to stand little changed on Thursday as weaker-than-expected reports on retail sales and jobless claims inserted some caution into the economic backdrop and forecasting of U.S. monetary policy. Investors, seeing a potential de-escalation in the conflict between Ukraine and Russian-backed separatists in the wee hours of Thursday with a new cease-fire agreement, had trimmed their positions in safe-haven U.S. Treasuries.
The data, which showed U.S. consumer spending barely rebounded in January suggests economic growth was slow at the start of the first quarter, and caused a knee-jerk reaction to buy Treasuries. The number of American’s filing first-time jobless claims rose more than expected last week; however the underlying trend remains consistent with a strengthening labor market.
“I think the median estimate for first-quarter growth is at 2.6 percent. This retail sales number and its implications for the pace of consumption will shave off a little bit of that GDP forecast,” said Ian Lyngen, senior government bond strategist, CRT Capital in Stamford, Connecticut. Lyngen added expectations on the timing for the U.S. Federal Reserve to begin raising interest rates later this year are not expected to change.
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