Treasuries Climb Off Early Lows But Still Close In The Red

After trending higher over the past few sessions, treasuries gave back some ground during the trading day on Friday.

Treasuries rebounded after an initial drop but remained firmly in negative territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.4 basis points to 1.666 percent.

The initial weakness among treasuries came amid concerns about inflation after the Labor Department released a report showing producer prices in the U.S. jumped by much more than expected in the month of March.

The Labor Department said its producer price index for final demand surged up by 1.0 percent in March after climbing by 0.5 percent in February. Economists had expected another 0.5 percent increase.

Excluding prices for food, energy, and trade services, core producer prices still rose by 0.6 percent in March after edging up by 0.2 percent in February. Economists had expected another 0.2 percent uptick.

Meanwhile, the Labor Department said the annual rate of producer price growth spiked to 4.2 percent in March from 2.8 percent in February.

Core producer prices in March were up by 3.1 percent compared to a year ago, reflecting a significant acceleration from the 2.2 percent increase in the previous month.

“The fiscally stimulated revival of consumer demand and strong base effects will lead to faster annual inflation rates in the spring,” said Mahir Rasheed, Associate U.S. Economist at Oxford Economics.

He added, “However, these should be temporary dynamics, and we continue to expect the Fed to remain accommodative through mid-2023.”

Next week’s trading may be impacted by reaction to reports on consumer prices, retail sales, industrial production and housing stocks.

The Federal Reserve is also scheduled to release its Beige Book, a compilation of economic evidence from the twelve Fed districts.

Bond traders are also likely to keep an eye on the results of the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.

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