U.S. Treasury yields fall as uncertainty mounts ahead of retail sales report


Aug 17 - U.S. Treasury yields were slower than German Bond yields on Tuesday, ahead of a U.S. retail sales report which may add to data showing slowing economic momentum.

Risk sentiment was also dampened by a further spike in COVID - 19 variant related situations in the Delta and uncertainty following the Taliban's seizure of power in Afghanistan, with stock markets in Europe opening lower.

Bond market focus is out of the United States, with a Reuters poll expecting retail sales to have fallen 0.2% month-on-month in July from a 0.6% increase in June.

But the industrial production is expected to increase 0.5% month on month, slightly higher than in June.

On Friday, an unexpected spike in U.S. consumer sentiment sent bond yields tumbling, signs that consumer spending faltered by a greater degree, given resurgent Delta variant, could prompt yet another market rethink of the U.S. Federal Reserve'sU.S. Federal Reserve's taper timeline.

Data on Monday showed manufacturing output and retail sales growth weaker than expected, adding further uncertainty to the economic growth picture. This generally benefits investment rates which move inversely with yields.

The focus is on the U.S. data, scoured for any hints of further economic deceleration and left the bias to lower rates intact for now, ING analysts told clients.

The German 10-year yield, the benchmark for the bloc, fell nearly 3 basis points to - 0.496% in early trade, the lowest since Aug. 6, tracking U.S. Treasury yields lower.

Italy's 10-year yield was similarly down to 0.54%, keeping the closely watched gap with German equivalents at 103 bps.

In the new and primary markets, Germany is to raise 6 billion euros from auction of a new two-year bond.

The focus will be on a speech from Fed Chairman Jerome Powell to follow the European markets closing at 1730 GMT.