Treasuries Continue To Regain Ground Following Inflation Data

Extending the rebound seen in the previous sessions, treasuries saw further upside during trading on Wednesday.

Bond prices fluctuated over the course of the session but largely maintained a positive bias. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.1 basis points to 1.725 percent.

The ten-year yield continued to give back ground after ending Monday’s trading at its highest closing level since January of 2020.

Treasuries continued to recover from the sell-off seen to start the New Year following the release of the Labor Department’s highly anticipated report on consumer price inflation in December.

While the report showed the annual rate of consumer price growth once again reached the highest level in almost 40 years, traders seemed relieved the acceleration was not even more significant.

The report showed the annual rate of consumer price growth accelerated to 7.0 percent in December from 6.8 percent in November, showing the biggest yearly jump since June of 1982.

Core consumer prices, which exclude food and energy prices, were up by 5.5 percent year-over-year in December compared to the 4.9 percent spike in November. The annual growth reflected the biggest surge since February of 1991.

The continued acceleration in the annual rate of consumer price growth came as prices increased by slightly more than expected on a monthly basis, although the pace of growth slowed from November.

Treasuries saw continued strength after the Treasury Department revealed this month’s auction of $36 billion worth of ten-year notes attracted slightly above average demand.

The ten-year note auction drew a high yield of 1.723 percent and a bid-to-cover ratio of 2.51, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.48.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Reports on weekly jobless claims and producer price inflation may attract attention on Thursday along with a Senate Banking Committee hearing on Lael Brainard’s nomination to be Federal Reserve Vice Chair.

The Treasury is also due to announce the results of this month’s auction of $22 billion worth of thirty-year bonds on Thursday.

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