Treasuries Turn Positive After Seeing Initial Weakness

After initially showing a modest move to the downside, treasuries turned higher over the course of the trading day on Wednesday.

Bond prices recovered from their early lows and climbed 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 2.6 basis points to 1.520 percent.

With the decrease on the day, the ten-year yield continued to give back ground after ending Monday’s trading at its highest closing level in over a year.

The rebound by treasuries came following the release of a Labor Department report showing tame consumer price inflation in the month of February.

The data partly offset concerns about the outlook for inflation, which have contributed to the recent spike in bond yields.

The Labor Department said its consumer price index climbed by 0.4 percent in February after rising by 0.3 percent in January. The increase in prices matched expectations.

Gasoline prices led the way higher once again, surging up by 6.4 percent in February following a 7.4 percent spike in January.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent in February after coming in unchanged for two straight months. Economists had expected core prices to rise by 0.2 percent.

On an annual basis, consumer price growth accelerated to 1.7 percent in February from 1.4 percent in January but core price growth slowed to 1.3 percent from 1.4 percent.

Treasuries remained positive following the release of the results of the Treasury Department’s auction of $38 billion worth of ten-year notes, which attracted roughly average demand.

The ten-year note auction drew a high yield of 1.523 percent and a bid-to-cover ratio of 2.38, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.42.

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 announce the results of this month’s auction of $24 billion worth of thirty-year bonds on Thursday.

Trading on Thursday may also be impacted by reaction to the Labor Department’s report on first-time claims for U.S. unemployment benefits in the week ended March 6th.

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