Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - Treasuries saw modest weakness during trading on Wednesday but ended the session well off their worst levels of the day.

After coming under pressure in early trading, bond prices climbed off their lows as the day progressed but still finished in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.5 basis points to 2.884 percent after reaching a high of 2.912 percent.

With the modest increase on the day, the ten-year yield added to the 4.2 basis point gain posted on Tuesday, climbing further off Monday's one-month closing low.

The early weakness among treasuries came as a report from the Labor Department showing the fastest rate of producer price growth in six months raised concerns about the outlook for monetary policy.

The Labor Department said its producer price index rose by 0.4 percent in December after edging down by 0.1 percent in November. The increase came as higher prices for energy and tobacco products offset a drop in food prices.

Excluding food and energy prices, the core producer price index increased by 0.3 percent in December after inching up by 0.1 percent in the previous month. Economists had expected core prices to tick up by another 0.1 percent.

A separate report from the New York Federal Reserve showed that business activity for New York manufacturers expanded at a much faster pace in the month of January.

The New York Fed said its general business conditions index jumped to 12.5 in January from 2.2 in December, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to climb to 3.5.

Later in the day, the Federal Reserve's Beige Book said reports from the twelve Fed districts suggest economic activity continued to expand across most regions and sectors from late November through the end of the year.

The Fed said most districts also reported positive economic outlooks, with some citing expectations of "more of the same" and some expecting a pickup in growth.

Trading on Wednesday may be impacted by another batch of economic data, including reports on weekly jobless claims, consumer prices, and homebuilder confidence.

Additionally, outgoing Fed Chairman Ben Bernanke is scheduled to deliver remarks on the challenges facing central banks.