Treasuries Regain Ground Following Inflation Data

(RTTNews) - After moving notably lower over the two previous sessions, treasuries regained some ground during trading on Friday.

Bond prices gave back ground after an early advance but remained in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 3.7 basis points to 4.669 percent.

With the decrease on the day, the ten-year yield gave back ground after reaching its highest levels in almost six months.

The rebound by treasuries came following the release of closely watched inflation readings showing consumer prices in the U.S. increased in line with economist estimates in the month of March.

The Commerce Department said its consumer price index rose by 0.3 percent in March, matching the increase seen in February as well as economist estimates.

Excluding food and energy prices, core consumer prices also climbed by 0.3 percent for the second straight month, in line with expectations.

Meanwhile, the report said the annual rate of consumer price growth accelerated to 2.7 percent in March from 2.5 percent in February. Economists had expected the pace of growth to tick up to 2.6 percent.

The annual rate of growth by core consumer prices in March came in unchanged from February at 2.8 percent, while economists had expected the pace of growth to slow to 2.6 percent.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department's report on personal income and spending in the month of March.

While the faster-than-expected annual rates of growth make a near-term interest rate cut increasingly unlikely, the rate concerns may have already been priced into the markets.

"The inflation data clearly are not cooperating right now," said Jamie Cox, Managing Partner for Harris Financial Group. "The good news is that the Fed has communicated to markets that rates will not change in the first half, so the market has had ample time to digest the pause in progress on the inflation front."

He added, "I expect the Fed to deal with the balance sheet first before initiating rate cuts, and a tapering of the runoff of the balance sheet could happen as early as June."

While the Fed's monetary policy announcement is likely to be in the spotlight next week, traders are also likely to keep a close eye on the monthly jobs report. Reports on manufacturing and service sector activity may also attract attention.