NEW YORK (CNNfn) - Treasury bonds fell nearly a point Tuesday after a government report showing the American consumer continues to spend with abandon could give the Federal Reserve one more reason to raise interest rates to preempt rising inflation, analysts said.
Just before 9:10 a.m. ET, the price of the benchmark 30-year Treasury bond fell 28/32 to 98-2/32. Its yield, which moves inversely to the price, rose to 6.27 percent form 6.20 percent Monday.
The bond market losses, the second in two days, came immediately after the Commerce Department said retail sales leapt 0.9 percent in November, blowing past analysts’ forecasts of a 0.5 percent gain.
"The retail sales number is what surprised them,” said David Ging, Treasury market strategist at Donaldson Lufkin & Jenrette. "It just shows you that the economy remains very strong and the Fed wants the economy to moderate somewhat.”
The losses for the inflation-sensitive bond market may have been worse were if not for a separate report showing prices at the consumer level remained tame in November. The Consumer Price index rose just 0.1 percent last month, lower than the 0.2 percent gains analysts expected.
Fed officials gather Dec. 21, but with the meeting so close to potential Y2K worries, they are expected to keep rates unchanged. But analysts say a rate hike, possibly as much as half a percentage point, likely will come at the next Fed gathering in February.
That’s because Tuesday’s strong report on November retail sales comes amid a host of inflation-suggesting factors. Stock markets are soaring, which according to economist makes consumer feel wealthier, prompting increased spending. A study Tuesday said same-store sales for the first 17 days of the holiday shopping season were up 4.2 percent from the same period last year. Unemployment remains near a 30-year low while consumer confidence is high.
All this likely will concern the Fed, the nation’s central bank, which already raised interest rates three times this year in a bid to slow the economy’s rapid growth and ward off inflation.
The dollar moved higher against the major currencies Tuesday, gaining strongly against the euro and less so compared against the yen. Still, November’s retails sales figures and consumer price data pushed the dollar off its earlier highs.
Just before 9:10 a.m., ET, the euro fell to $1.0038 from $1.0139 Monday, a 1 percent drop in the euro’s value.
"Talk in the market that the Bank of France may have played a role in
Dutch banking group ING's decision to withdraw its offer for Credit Commercial de
France further soured the market's sentiment for the single currency,” Ruesch International said in a note to clients Tuesday.
This comes after many analysts partially attributed the euro’s slide below $1 earlier this month to concerns that the region’s central banks were too meddlesome in the markets.
The dollar, meanwhile, rose to 103.71 yen from 103.17 yen Monday, a 0.51 percent gain in the dollar’s value.
The yen slide continues a trend that began Monday, when a report cast doubts on the strength of Japan’s economic recovery. In the report, the "tankan survey” showed Japanese business optimism had not risen as fast as expected. 
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