Treasuries saw substantial volatility during trading on Wednesday as traders reacted to consumer price inflation data as well as the minutes of the latest Federal Reserve meeting.
Bond prices showed wild swings over the course of the session before closing modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 3.421 percent.
Treasuries initially surged following the release of a Labor Department report showing U.S. consumer prices increased by less than expected in the month of March.
The Labor Department said its consumer price index inched up by 0.1 percent in March after climbing by 0.4 percent in February. Economists had expected consumer prices to rise by 0.3 percent.
The report also showed the annual rate of consumer price growth slowed to 5.0 percent in March from 6.0 percent in February.
The year-over-year growth was slower than the 5.2 percent expected by economists and marks the smallest 12-month increase since May 2021.
The report also said core consumer prices, which exclude food and energy prices, rose by 0.4 percent in March after advancing by 0.5 percent in February. The increase matched economist estimates.
The annual rate of growth by core consumer prices accelerated to 5.6 percent in March from 5.5 percent in February, which was also in line with expectations.
Treasuries showed a notable pullback over the course of the morning, however, as many economists said they still expect the Federal Reserve to raise interest rates by another quarter point early next month.
Nonetheless, bond prices moved back to the upside late in the session after the minutes of the latest Fed meeting suggested the recent banking sector turmoil could lead to a recession.
The minutes of the March 21-22 meeting revealed that the staff’s economic projection in light of the banking sector turmoil included a mild recession starting later this year, with a recovery over the subsequent two years.
Looking ahead, trading on Thursday may be impacted by reaction to reports on weekly jobless claims and producer price inflation.
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