Treasuries Move To The Downside Following Inflation Data

(RTTNews) - After showing a lack of direction early in the session, treasuries moved to the downside over the course of the trading day on Wednesday.

Bond prices slid firmly into negative territory as the day progressed, extending the downward move seen over the two previous sessions.

Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.0 basis points to 4.271 percent.

The ten-year yield closed higher for the third consecutive session after ending last Friday's trading at its lowest closing level in over a month.

The lower close by treasuries came following the release of closely watched consumer price inflation data that came in line with economist estimates.

The Labor Department said its consumer price index climbed by 0.3 percent in November after rising by 0.2 percent for four straight months. The increase matched expectations.

The annual rate of growth by consumer prices ticked up to 2.7 percent in November from 2.6 percent in October, which was also in line with estimates.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in November, matching the increases seen in each of the three previous months as well as expectations.

The Labor Department also said core consumer prices in November jumped by 3.3 percent compared to the same month a year ago, unchanged from October and in line with estimates.

While the Federal Reserve is still widely expected to lower interest rates by 25 basis points next week, annual price growth remaining relatively high has led to concerns the central bank will cut rates more slowly than previously anticipated next year.

"The Fed appears happy to gradually move policy closer to the neutral level of around 3% and we expect another 25bp rate cut next week," said ING Chief International Economist James Knightley.

She added, "However, the lack of meaningful progress on inflation means that in their summary of economic projections, officials are likely to signal just three rate cuts in 2025 versus the four they projected in September."

Treasuries saw continued weakness in afternoon trading even after the Treasury Department revealed this month's auction of $39 billion worth of ten-year notes attracted above average demand.

A report on producer price inflation in the month of November may attract attention on Thursday along with a report on weekly jobless claims.