Treasuries Extend Recent Upward Trend Following Inflation Data
Treasuries moved notably higher during trading on Thursday, extending the strong upward move seen over the past few sessions.
After seeing early strength, bond prices saw some further upside before moving roughly sideways in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.0 basis points to 3.761 percent.
The ten-year yield moved lower for the fourth straight session after reaching its highest closing level in four months last Friday.
The continued strength among treasuries came following the release of a Labor Department report showing producer prices in the U.S. inched up by slightly less than expected in the month of June.
The Labor Department said its producer price index for final demand crept up by 0.1 percent in June after falling by a revised 0.4 percent in May.
Economists had expected producer prices to rise by 0.2 percent compared to the 0.3 percent dip originally reported for the previous month.
The report also said the annual rate of producer price growth slowed to just 0.1 percent in June from a revised 0.9 percent in May.
The pace of growth was expected to slow to 0.4 percent from the 1.1 percent originally reported for the previous month.
Following yesterday’s tamer-than-expected consumer price inflation data, the data further eased concerns about the outlook for interest rates.
“The disinflation narrative is in full effect with less-than-expected PPI numbers today following on the heels of lower-than-expected CPI numbers yesterday,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
He added, “It does appear that inflation is coming down across the board and although the Fed is still likely to raise rates again at the end of this month, there is a very strong possibility that they are done raising rates for the year.”
Meanwhile, a separate Labor Department report unexpectedly showed a modest decrease in first-time claims for U.S. unemployment benefits in the week ended July 8th.
The Labor Department said initial jobless claims slipped to 237,000, a decrease of 12,000 from the previous week’s revised level of 249,000.
The dip surprised economists, who had expected jobless claims to inch up to 250,000 from the 248,000 originally reported for the previous week.
A report on import and export prices in the month of June may attract some attention on Friday along with the University of Michigan’s preliminary reading on consumer sentiment in the month of July.
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