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Treasuries Extend Yesterday's Move To The Upside

Treasuries moved to the upside during trading on Wednesday, extending the advance seen over the course of the previous session.

Bond prices moved higher early in the session and hovered in positive territory for the rest of the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 3 basis points to 1.788 percent.

Another tame reading on inflation contributed to the early strength among treasuries, as the data reinforced expectations that the Federal Reserve will leave interest rates unchanged.

The report released by the Labor Department showed a modest increase in U.S. producer prices in the month of December.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in December after coming in unchanged in November. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices still crept up by 0.1 percent in December after dipping by 0.2 percent in November. Core prices were also expected to increase by 0.2 percent.

"Overall, there is still little sign of any significant rise in price pressures at the start of the inflation pipeline, underlining our view that the Fed will keep interest rates on hold for the foreseeable future," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

Meanwhile, traders largely shrugged off the official signing of the U.S.-China phase one trade deal by President Donald Trump and Chinese Vice Premier Liu He.

Trump said the deal calls for China to purchase $200 billion worth of U.S. goods over the next two years, including up to $50 billion worth of agricultural products.

The deal also purportedly addresses issues such as China's intellectual property theft, forced technology transfers and currency manipulation.

In exchange, the U.S. will scrap a new round of tariffs and cut tariffs on approximately $120 billion worth of Chinese goods in half to 7.5 percent.

Trump noted a 25 percent tariff on $250 billion worth of Chinese imports will remain in place in order to give the U.S. leverage as the two countries enter into phase two negotiations.

Trading on Thursday may be impacted by reaction to a slew of U.S. economic data, with traders likely to keep an eye on reports on retail sales, weekly jobless claims, import and export prices and homebuilder confidence.

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