Treasuries Show Notable Turnaround After Initial Weakness

(RTTNews) - After coming under pressure early in the session, treasuries showed a notable turnaround over the course of the trading day on Friday.

Bond prices climbed well off their early lows to end the day modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down 1.5 basis points to 3.828 percent after reaching a high of 3.900 percent.

The early weakness among treasuries reflected ongoing concerns about the outlook for interest rates following this week's batch of economic data.

Reports on consumer and producer price inflation and retail sales have led to worries the Federal Reserve could raise rates higher than currently anticipated.

Recent comments from Fed officials have added to the concerns, with some suggesting the central bank could raise rates by another 50 basis points next month.

The subsequent turnaround by treasuries may have reflected bargain hunting after the ten-year yield reached its highest intraday level in well over a month.

A report showing a continued decrease in U.S. import prices may also have helped to offset the negative sentiment.

The Labor Department said import prices dipped by 0.2 percent in January after edging down by a revised 0.1 percent in December. The modest decrease matched economist estimates.

With import prices declining for the seventh straight month, the annual rate of growth slowed to 0.8 percent in January from 3.0 percent in December.

The year-over-year growth was much slower than the 2.9 percent expected by economists and reflects the slowest annual growth since December 2020.

"Import prices provided some encouraging news on the inflation front after stronger than expected CPI and PPI reports earlier this week," said Matthew Martin, US Economist at Oxford Economics.

He added, "The news, however encouraging, will likely factor little into the Fed's decision to raise rates at the March meeting, and potentially the May meeting as well, as it continues to wrangle with stubborn inflation."

Following the long Presidents Day weekend, a report on personal income and spending is likely to be in focus next week, as it includes a reading on inflation said to be preferred by the Federal Reserve.

The minutes of the latest Fed meeting may also attract attention along with reports on new and existing home sales.