Treasuries Move Higher Ahead Of Key Inflation Data

Treasuries moved to the upside over the course of the trading day on Wednesday, partly offsetting the weakness seen in the previous session.

Bond prices moved modestly higher early in the session and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.5 basis points to 1.929 percent.

With the decrease on the day, the ten-year yield gave back ground after ending the previous session at its highest closing level in well over two years.

Treasuries may have benefited from their appeal as a safe haven ahead of the release of highly anticipated consumer price inflation data on Thursday.

The Labor Department report is expected to show consumer prices and core consumer prices, which exclude food and energy, both increased by 0.5 percent in January.

The annual rate of growth in consumer prices is expected to accelerate to 7.3 percent in January from 7.0 percent in December, while the annual growth in core prices is expected to accelerate to 5.9 percent from 5.5 percent.

The data may impact expectations regarding how aggressively the Federal Reserve plans to raise interest rates in an effort to fight inflation.

Treasuries reached their highs of the session after the Treasury Department revealed this month’s auction of $37 billion worth of ten-year notes attracted well above average demand.

The ten-year note auction drew a high yield of 1.904 percent and a bid-to-cover ratio of 2.68, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.49.

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

The Treasury is due to finish off this week’s series of announcements of the results of its long-term securities auctions on Thursday, revealing the results of this month’s auction of $23 billion worth of thirty-year bonds.

The consumer price inflation data is likely to be in the spotlight on Thursday, although traders are also likely to keep an eye on the weekly jobless claims report.

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