Treasuries Regain Ground Following Inflation Data

Following the sharp pullback seen in the previous session, treasuries regained some ground during the trading day on Friday.

Bond prices moved to the upside in early trading and remained positive throughout most of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.5 basis points to 3.819 percent.

The ten-year yield moved lower after surging by 14.4 basis points on Thursday to its highest closing level in well over three months.

The rebound by treasuries came following the release of a Commerce Department report showing an unexpected slowdown in the annual rate of consumer price growth in the month of May.

The report said the annual rate of consumer price growth slowed to 3.8 percent in May from 4.3 percent in April. The slowdown surprised economists, who had expected growth to accelerate to 4.6 percent.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also slowed to 4.6 percent in May from 4.7 percent in April. Economists had expected the pace of growth to be unchanged.

The readings on consumer price inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

While economists generally still expect the Fed to raise interest rates by another quarter point next month, the data has added to optimism the central bank will not follow through with additional rate hikes.

With the 4th of July holiday on Tuesday, trading activity may be somewhat subdued next week ahead of the release of the closely watched monthly jobs report on Friday.

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