Treasuries Regain Ground Ahead Of Closely Watched Inflation Data

(RTTNews) - After moving to the downside over the two previous sessions, treasuries regained some ground during trading on Wednesday.

Bond prices gave back ground after an early advance but moved back to the upside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 4.1 basis points to 4.274 percent.

The early strength among treasuries came as revised data released by the Commerce Department showed the U.S. economy grew by slightly less than previously estimated in the fourth quarter of 2023.

The Commerce Department said the jump by real gross domestic product in the fourth quarter was downwardly revised to 3.2 percent from the previously reported 3.3 percent. Economists had expected the surge in GDP to be unrevised.

"In a market environment where people are worried about a Fed keeping rates higher for longer, any drop in economic activity (or inflation) can be seen as another reason why the Fed can cut rates sooner," said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

Buying interest waned shortly after the start of trading, however, as traders seemed reluctant to make significant moves ahead of the release of closely watched readings on consumer price inflation on Thursday.

The inflation readings, which are said to be preferred by the Federal Reserve, are expected to show the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December.

The annual rate of growth by core consumer prices, which exclude food and energy prices, is also expected to dip to 2.8 percent in January from 2.9 percent in December.

With Fed officials saying they need greater confidence inflation is slowing before they consider cutting interest rates, the data could have a significant impact on the outlook for rates.

The inflation readings are likely to be in the spotlight on Thursday, although traders are also likely to keep an eye on reports on weekly jobless claims and pending home sales.