Treasuries Move Notably Higher Following Producer Price Data

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

Bond prices moved notably higher in morning trading and remained firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.5 basis points to 1.432 percent.

The ten-year yield more than offset the increase seen on Monday, ending the session at its lowest closing level in well over a month.

The rebound by treasuries came as a report from the Labor Department showed producer prices increased by slightly more than expected in October, although the data was not seen as likely to urge the Federal Reserve to raise interest rates anytime soon.

The Labor Department said its producer price index for final demand advanced by 0.6 percent in October after climbing by 0.5 percent in September. Economists had expected another 0.5 percent increase.

Core producer prices, which exclude prices for food, energy, and trade services, rose by 0.4 percent in October after inching up by 0.1 percent in September. Core prices were expected to edge up by 0.2 percent.

Compared to the same month a year ago, producer prices in October were up by 8.6 percent, unchanged from the previous month.

Meanwhile, the report showed the annual rate of growth in core producer prices accelerated to 6.2 percent from 5.9 percent.

Treasuries pulled back off their highs of the session after the Treasury Department revealed this month’s auction of $39 billion worth of ten-year notes attracted below average demand.

The ten-year note auction drew a high yield of 1.444 percent and a bid-to-cover ratio of 2.35, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.48.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The Treasury is due to announce the results of this month’s auction of $25 billion worth of thirty-year bonds on Wednesday.

Trading on Wednesday may also be impacted by reaction to reports on consumer price inflation and weekly jobless claims.

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