Treasuries Close Higher Following U.K. Inflation Data

After ending yesterday’s lackluster session moderately higher, treasuries saw further upside over the course of the trading day on Wednesday.

Bond prices pulled back near the unchanged line after seeing initial strength but climbed back firmly into positive territory as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.7 basis points to 3.742 percent.

The higher close by treasuries came following the release of data showing U.K. headline inflation fell to a 15-month low in the month of June.

Data from the Office for National Statistics showed the nation’s annual headline inflation falling to a 15-month low to 7.9 percent in June from 8.7 percent in May. Meanwhile, core inflation came in at 6.9 percent.

The drop in inflation strengthened the case for a quarter point rate hike from the Bank of England rather than an aggressive half a percentage point increase at the August meeting.

Meanwhile, final data from Eurostat showed consumer price inflation in the Euro Area was confirmed at 5.5 percent in June, the lowest level since January 2022.

The European reports may have reminded traders of recent encouraging U.S. inflation data, which has added to optimism the Federal Reserve is nearing the end of its interest rate hikes.

The Fed is still widely expected to raise rates by another quarter point next week, but traders are hopeful that will be the last.

On the U.S. economic front, the Commerce Department released a report showing a sharp pullback in housing starts in the month of June.

The Commerce Department said housing starts plunged by 8.0 percent to an annual rate of 1.434 million in June after spiking by 15.7 percent to a revised rate of 1.559 million in May.

Economists had expected housing starts to plummet by 9.3 percent to a rate of 1.480 million from the 1.631 million originally reported for the previous month.

The report said building permits also tumbled by 3.7 percent to an annual rate of 1.440 million in June after surging by 5.6 percent to a revised rate of 1.496 million in May.

Building permits, an indicator of future housing demand, were expected to edge down by 0.1 percent to a rate of 1.490 million from the 1.491 million originally reported for the previous month.

Looking ahead, trading on Thursday may be impacted by reaction to reports on weekly jobless claims, Philadelphia-area manufacturing activity and existing home sales.

Source: Read Full Article