Treasuries Move Back To The Downside Ahead Of Inflation Data

Following the rebound seen in the previous session, treasuries moved back to the downside during trading on Tuesday.

Bond prices regained ground after an initial drop but remained in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.2 basis points to 2.797 percent.

The pullback by treasuries came as traders looked ahead to the release of a highly anticipated reading on U.S. consumer price inflation on Wednesday.

The report is expected to show consumer prices edged up by 0.2 percent in July after jumping by 1.3 percent in June. The annual rate of growth is expected to slow to 8.7 percent from a four-decade high of 9.1 percent.

Core consumer prices, which exclude food and energy prices, are expected to rise by 0.5 percent in July after climbing by 0.7 percent in June. Annual core consumer price growth is expected to accelerate to 6.1 percent from 5.9 percent.

Meanwhile, traders largely shrugged off the results of the Treasury Department’s auction of $42 billion worth of three-year notes, which attracted above average demand.

The three-year note auction drew a high yield of 3.202 percent and a bid-to-cover ratio of 2.50, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.44.

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 Wednesday is likely to be driven by reaction to the report on consumer price inflation, which could impact the outlook for interest rates.

The consumer price data is likely to overshadow the results of the Treasury Department’s auction of $35 billion worth of ten-year notes.

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