Treasuries Show Notable Move Back To The Upside

Following the pullback seen in the previous session, treasuries showed a notable move back to the upside during trading on Tuesday.

Bond prices fluctuated after an early rally but managed to remain in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.6 basis points to one-month closing low of 3.799 percent.

The ten-year yield more than offset the 3.6 basis point increase seen on Monday, falling to its lowest closing level in over a month.

The early advance by treasuries came following the release of a Labor Department report showing producer prices in the U.S. crept up by much less than expected in the month of October.

The Labor Department said its producer price index for final demand inched up by 0.2 percent in October, matching a revised uptick in September.

Economists expected producer prices to climb by 0.5 percent compared to the 0.4 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 8.0 percent in October from 8.4 percent in September. The year-over-year growth was expected to edge down to 8.3 percent.

Following last week's tamer-than-expected consumer price inflation report, the data added to optimism about the Federal Reserve slowing the pace of interest rate hikes as soon as next month.

"It's premature to conclude a dovish Fed pivot is on the way, though Vice Chair Lael Brainard's comments yesterday, on top of downside surprises in both October CPI and PPI reports, raise the odds," said Will Compernolle, Senior Economist at FHN Financial.

CME Group's FedWatch Tool is currently indicating an 80.6 percent chance the Fed will raise rates by 50 basis points next month and a 19.4 percent chance of another 75 basis point rate hike.

Bond prices gave back ground over the course of the morning but moved back to the upside following reports Russian missiles crossed into Poland, killing two people.

Trading on Wednesday may be impacted by reaction to a slew of U.S. economic data, including reports on retail sales, import and export prices and industrial production.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT