Slowdown In Consumer Price Growth Contributes To Strength Among Treasuries
After ending the previous session roughly flat, treasuries showed a strong move to the upside during trading on Wednesday.
Bond prices moved higher early in the session and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 8.2 basis points to 3.439 percent.
The strength among treasuries came following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of April.
The Labor Department said its consumer price index climbed by 0.4 percent in April after inching up by 0.1 percent in March. Economists had expected consumer prices to rise by 0.4 percent.
Excluding food and energy prices, core consumer prices also rose by 0.4 percent in April, matching the increase seen in March as well as economist estimates.
The report also showed the annual rate of consumer price growth edged down to 4.9 percent in April from 5.0 percent in March. Economists had expected the year-over-year growth to be unchanged.
The annual rate of core consumer price growth also slipped to 5.5 percent in April from 5.6 percent in March. The modest slowdown matched economist estimates.
With the annual consumer price growth marking the smallest 12-month increase since April 2021, the data added to optimism about the Federal Reserve pausing its interest rate hikes.
CME Group’s FedWatch Tool is currently indicating a 98.5 percent chance the Federal Reserve will leave interest rates unchanged at its next meeting in June.
Treasuries saw some further upside after the Treasury Department revealed this month’s auction of $35 billion worth of ten-year notes attracted modestly above average demand.
The ten-year note auction drew a high yield of 3.448 percent and a bid-to-cover ratio of 2.45, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.40.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Trading on Thursday may be impacted by reaction to separate Labor Department reports on producer price inflation and weekly jobless claims.
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