Treasuries Extend Pullback As Producer Price Growth Exceeds Estimates

Following the pullback seen in the previous session, treasuries showed another notable move to the downside during trading on Friday.

Bond prices came under pressure in early trading and slid more firmly into negative territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 7.6 basis points to 3.567 percent.

The ten-year yield moved higher for the second straight session after ending Wednesday’s trading at a nearly three-month closing low.

The continued weakness among treasuries came following the release of a report from the Labor Department showing U.S producer prices increased by more than expected in the month of November.

The Labor Department said its producer price index for final demand rose by 0.3 percent in November, matching upwardly revised increases in October and September.

Economists had expected producer prices to inch up by 0.1 percent compared to the 0.2 percent uptick originally reported for the previous month.

Meanwhile, the report showed the annual rate of producer price growth slowed to 7.4 percent in November from 8.1 percent in October, in line with economist estimates.

The bigger than expected monthly increase in producer prices added to recent worries about the outlook for interest rates.

While the Federal Reserve is widely expected to slow the pace of rate hikes next week, traders have recently expressed concerns about how much further the Fed will need to raise rates in order to contain inflation.

Traders largely shrugged off a report from the University of Michigan showing a decrease in consumers’ inflation expectations.

The report showed one-year inflation expectations fell to a fifteen-month low of 4.6 percent in December from 4.9 percent in November, although five-year inflation expectations held at 3.0 percent.

While the Fed decision is likely to be in the spotlight next week, traders are also likely to keep an eye on reports on consumer prices, import and export prices, retail sales and industrial production.

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