Reply #35: U.S. Treasury Notes Gain; Retail Sales Rise Less Than Forecast [View All]

[54anickel]

http://quote.bloomberg.com/apps/news?pid=10000006&sid=acNwC4JB6WAk&refer=home

April 13 (Bloomberg) -- U.S. Treasury notes rose after a government report showed retail sales in March rose less than forecast, boosting speculation the Federal Reserve can stick to a policy of gradually raising interest rates.

Signs of weaker consumer spending may damp speculation that inflation is quickening. Even as inflation risks are ``now tilted a little to the upside,'' Fed policy makers said ``a degree of economic slack apparently remained'' and an ``accelerated pace'' of rate increases is not necessary for the time being.

``With these type of numbers, the bond market is realizing the Fed is not going to be as aggressive as most people were expecting it to be,'' said Andrew Harding, director of taxable fixed-income assets at National City Investment Management in Cleveland who manages $6 billion. ``The Treasury market has a good excuse to rebuild long positions.''

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The retail report comes a day after Treasury 10-year notes had their biggest gain in more than two months, when minutes of the Fed's March rate meeting suggested policy makers see no need to move faster on rate increases. They may even pause in raising rates ``if the data warrants,'' according to the minutes.

``The Fed may stop earlier rather than later,'' said Gerald Lucas, head of U.S. Treasury and agency debt strategy at Banc of America Securities LLC in New York. ``This may keep the Fed from going 50'' basis points in a single increase, but won't put an end to the cycle of higher rates, he said.

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