Treasuries Show Strong Move To The Upside Following Inflation Data
(RTTNews) - Treasuries showed a strong move to the upside during trading on Thursday as bond traders reacted positively to another relatively tame reading on U.S. inflation.
Bond prices gave back some ground after an early surge but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, declined 4.1 basis points to 4.641 percent.
The strength among treasuries came after the Labor Department released a report showing producer prices in the U.S. unexpectedly came in flat in the month of July.
The Labor Department said its producer price index for final demand was unchanged in July after edging down by a revised 0.1 percent in June.
Economists had expected producer prices to rise by 0.2 percent compared to the 0.3 percent dip originally reported for the previous month.
The report also said the annual rate of growth by producer prices slowed to 4.7 percent in July from 5.5 percent in June. The annual rate of growth was expected to slow to 4.9 percent.
Combined with yesterday's report showing only a slight uptick in consumer prices and last Friday's report showing an unexpected decrease in jobs, the data added to optimism about the outlook for interest rates.
According to CME Group's FedWatch Tool, the chances the Federal Reserve raised rates by a quarter point at its next meeting in September have fallen to 34.6 percent from 55.0 percent a week ago.
Treasuries also benefited from a steep drop by the price of crude oil, with U.S. crude oil futures plunging by 2.6 percent on the day.
Crude oil prices are under pressure as worries about the outlook for demand are overshadowing the supply concerns raised by the ongoing conflict in the Middle East.
