Treasuries Finish Volatile Session Moderately Higher

(RTTNews) - After ending yesterday's trading firmly positive on late-day strength, treasuries fluctuated over the course of the trading session on Friday.

Bond prices bounced back and forth across the unchanged line before eventually closing moderately higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 3.950 percent.

The volatility on the day came as traders reacted to a Labor Department report showing producer prices in the U.S. unexpectedly edged slightly lower in the month of December.

The Labor Department said its producer price index for final demand slipped by 0.1 percent in December, matching a revised dip in November.

Economists had expected producer prices to inch up by 0.1 percent compared to the unchanged reading originally reported for the previous month.

Meanwhile, the report said the annual rate of producer price growth accelerated to 1.0 percent in December from a downwardly revised 0.8 percent in November.

The annual rate of producer price growth was expected to speed up to 1.3 percent from the 0.9 percent originally reported for the previous month.

After yesterday's report showing consumer prices in the U.S. rose by slightly more than expected in the month of December, the whole price data added to recent uncertainty about the outlook for interest rates.

"PPI reports always feel secondary when they're released after the more-important CPI data, but considering the December PPI does not incorporate new supply chain issues from conflicts in the Red Sea, this morning's report feels particularly backward-looking," said FHN Financial Macro Strategist Will Compernolle.

"As a result, the encouraging aspects of December data on producer prices should be largely dismissed for now," he added. "We'll have to wait until January to see how recent supply chain problems pass through to US producer prices."

Following the long holiday weekend, next week's trading may be impacted by reaction to the latest economic news, including reports on retail sales, industrial production, import and export prices, housing starts and consumer sentiment.