2019.02.1415:21:00UTC+00Treasuries Show Notable Rebound On Disappointing Retail Sales Data

After trending lower over the past few sessions, treasuries showed a strong move back to the upside during the trading day on Thursday.

Bond prices moved notably higher early in the day and remained firmly positive throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.1 basis points to 2.657 percent.

The rebound by treasuries came after a report from the Commerce Department unexpectedly showed a substantial decrease in retail sales in December, increasing the appeal of safe havens like bonds.

The Commerce Department said retail sales tumbled by 1.2 percent in December after inching up by a revised 0.1 percent in November.

Economists had expected retail sales to rise by 0.2 percent, matching the uptick originally reported for the previous month.

Excluding a jump in auto sales, retail sales plunged by an even steeper 1.8 percent in December after coming in unchanged in November. Ex-auto sales had been expected to edge up by 0.1 percent.

Sales by gas stations helped lead the way lower amid a drop in gasoline prices, plummeting by 5.1 percent in December following a 4.4 percent nosedive in November.

Underlying sales figures were also troubling, however, as closely watched core retail sales, which exclude autos, gasoline, building materials and food services, tumbled by 1.7 percent in December after an upwardly revised 1.0 percent jump in November.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the data suggests the economy entered 2019 with much less momentum than anticipated.

"That doesn't mean the economy is falling into recession; after all, that decline is hard to square with the recent strength of payroll gains and the drop in energy prices in recent months," Pearce said.

He added, "But with the producer price data suggesting inflationary pressures remain contained, it strengthens the case for the Fed to remain 'patient' in the months ahead."

A separate Labor Department report showed producer prices in the U.S. unexpectedly edged lower in the month of January.

The Labor Department said its producer price index for final demand slipped by 0.1 percent for the second straight month in January. Economists had expected the index to inch up by 0.1 percent.

Excluding steep drops in food and energy prices, core producer prices increased by 0.3 percent in January after coming in unchanged in December. Core producer prices were expected to rise by 0.2 percent.

Reflecting the monthly decrease, the annual rate of producer price growth slowed to 2.5 percent in January from 2.8 percent in December.

The annual rate of growth in core producer prices also slipped to 2.6 percent in January from 2.7 percent in the previous month.

Economic data may remain in focus on Friday, with traders likely to keep an eye on reports on import and export prices, industrial production, and consumer sentiment.