Treasuries See Further Downside Following Yesterday's Sell-Off

(RTTNews) - After moving sharply lower over the course of the previous session, treasuries saw some further downside during trading on Wednesday.

Bond prices showed a lack of direction for much of the day before drifting lower going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.2 basis points to 2.303 percent.

The ten-year yield added to the 10.1 basis point gain posted on Tuesday, reaching its highest closing level in nearly two months.

The continued weakness among treasuries came as traders looked ahead to the Federal Reserve's monetary policy announcement on Thursday.

While analysts remain split on whether the Fed will raise interest rates, a Labor Department report showing tame inflation may have provided further support for the view that the central bank will leave rates at record lows.

The report said consumer prices in August were up by just 0.2 percent compared to the same month a year ago, unchanged from the previous month and well below the Fed's 2 percent target.

The report said the annual rate of growth in core consumer prices, which exclude food and energy prices, was also unchanged at 1.8 percent.

Rob Carnell, chief international economist at ING, said, "This result doesn't even give a directional boost to the hawks, which might have been the case if energy had dragged just a little less."

"That said, this was never likely to be a decisive piece of data, and the FOMC members will probably go into this meeting already with a good idea of what they want to do," he added.

Meanwhile, the National Association of Home Builders released a separate report showing a continued improvement in homebuilder confidence in the month of September.

The report said the NAHB/Wells Fargo Housing Market Index crept up to 62 in September from 61 in August, while economists had expected the index to come in unchanged.

With the unexpected uptick, the housing market index reached its highest level since hitting 68 in October of 2005.

The Fed is likely to be in focus throughout the trading session on Thursday, overshadowing reports on weekly jobless claims, housing starts and Philadelphia-area manufacturing activity.