Treasuries Move Sharply Higher After Early Volatility

After seeing significant volatility early in the session, treasuries moved sharply higher over the course of the trading day on Thursday.

Bond prices climbed firmly into positive after spending early trading bouncing back and forth across the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.5 basis points to 3.449 percent.

With the steep drop on the day, the ten-year yield ended the session at its lowest closing level in over a month.

The strength that emerged among treasuries came following the release of highly anticipated consumer price inflation data, which largely came in line with economist estimates.

The Labor Department said its consumer price index edged down by 0.1 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to come in unchanged.

The report also showed the annual rate of consumer price growth slowed to 6.5 percent in December from 7.1 percent in November, in line with expectations. The annual growth was the slowest since October 2021.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in December following a 0.2 percent uptick in November. The increase matched economist estimates.

The annual rate of core price growth slowed to 5.7 percent in December from 6.0 percent in November. The year-over-year growth was also in line with expectations.

The slower price growth eased concerns about the outlook for interest rates, although the Federal Reserve is still widely expected to raise rates by at least 25 basis points at its next meeting.

Treasuries saw further upside after the Treasury Department revealed this month’s auction of $18 billion worth of thirty-year bonds attracted above average demand.

The thirty-year bond auction drew a high yield of 3.585 percent and a bid-to-cover ratio of 2.45, 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.

The Treasury revealed earlier this week that this month’s auctions of $40 billion worth of three-year notes and $32 billion worth of ten-year notes also attracted above average demand.

A report on import and export prices in December may attract attention on Friday along with preliminary data on consumer sentiment in January, which includes readings on inflation expectations.

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