Treasuries Continue To Regain Ground Following Wholesale Inflation Data

(RTTNews) - Following the rebound seen in the previous session, treasuries saw further upside during the trading day on Wednesday.

Bond prices gave back some ground after an early upward move but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.8 basis points to 2.687 percent.

The ten-year yield added to the 5.5 basis point drop seen on Tuesday, pulling back further off the three-year closing high set on Monday.

Treasuries further offset recent weakness as traders remained optimism inflation has peaked even after the Labor Department released a report showing U.S. producer prices surged by more than expected in the month of March.

The Labor Department said its producer price index for final demand shot up by 1.4 percent in March after advancing by an upwardly revised 0.9 percent in February.

Economists had expected producer prices to jump by 1.1 percent compared to the 0.8 percent increase originally reported for the previous month.

Energy prices led the way higher, skyrocketing by 5.7 percent during the month, while food prices also spiked by 2.4 percent.

With the bigger than expected monthly increase, the annual rate of producer price growth accelerated to a record high 11.2 percent in March from 10.3 percent in February.

Meanwhile, treasuries did not show much reaction to the results of the Treasury Department's auction of $20 billion worth of thirty-year bonds, which attracted average demand.

The thirty-year bond auction drew a high yield of 2.815 percent and a bid-to-cover ratio of 2.30, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.31.

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

Trading on Thursday may be impacted by reaction to the latest batch of U.S. economic data, including reports on initial jobless claims, retail sales, import and export prices and consumer sentiment.