Treasuries Move To The Upside Ahead Of Fed Announcement
Treasuries gave back ground after an initial jump but moved back to the upside in the latter part of the trading session on Tuesday.
Bond prices spent much of the session lingering near the unchanged line but climbed back into positive territory in afternoon trading.
Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 3.3 basis points to 4.206 percent.
Treasuries initially benefited from the release of a highly anticipated Labor Department report showing U.S. consumer prices inched up in line with economist estimates in the month of November.
The Labor Department said its consumer price index crept up by 0.1 percent in November after coming in unchanged in October. The uptick matched expectations.
Excluding food and energy prices, core consumer prices rose by 0.3 percent in November after edging up by 0.2 percent in October. The increase in core prices also came in line with estimates.
The report also said the annual rate of consumer price growth slipped to 3.1 percent in November from 3.2 percent in October, while the annual rate of core consumer price growth was unchanged at 4.0 percent.
Buying interest waned shortly after the release of the report, however, as traders wondered whether the slowdown in price growth was enough to convince the Federal Reserve to pivot toward lowering interest rates.
While the Fed is widely expected to leave interest rates unchanged on Wednesday, traders will be looking to the accompanying statement and projections for signs the central bank could begin cutting rates next year.
The late-day advance by treasuries came after the Treasury Department revealed this month’s auction of $21 billion worth of thirty-year bonds attracted above average demand.
The thirty-year bond auction drew a high yield of 4.344 percent and a bid-to-cover ratio of 2.43, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.37.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Ahead of the Fed announcement, early trading on Wednesday may be impacted by reaction to the Labor Department’s report on producer price inflation in November.
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