Treasuries Move Notably Higher Following Consumer Price Inflation Data


After an initial move to the downside, treasuries moved notably higher over the course of the trading day on Tuesday.

Bond prices climbed well off their early lows and firmly into positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.7 basis points to 1.277 percent.

The turnaround by treasuries came following the release of a highly anticipated Labor Department report showing consumer prices increased by slightly less than expected in the month of August.

The Labor Department said its consumer price index rose by 0.3 percent in August after climbing by 0.5 percent in July. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices inched up by just 0.1 percent in August after rising by 0.3 percent in July. Economists had been expecting another 0.3 percent increase.

The report also showed a slowdown in the annual rate of consumer price growth, which dipped to 5.3 percent in August from 5.4 percent in July.

The annual rate of core consumer price growth also slowed to 4.0 percent in August from 4.3 percent in the previous month.

The relatively tame inflation data eased concerns that the Federal Reserve will be pressured into raising interest rates sooner than expected.

The Fed is scheduled to hold a monetary policy meeting next week, with many expecting the central bank to provide an update on the outlook for its asset purchase program.

With officials indicating inflation has reached a level consistent with tapering asset purchases, some traders worry the Fed could jump the gun amid signs of a slowdown in economic momentum.

A Fed report on industrial production may attract attention on Wednesday along with separate reports on import and export prices and New York manufacturing activity.

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