Treasuries See Further Upside Following Latest Inflation Data

(RTTNews) - Treasuries moved to the upside during trading on Wednesday, extending the rebound seen over the two previous sessions.

Bond prices gave back some ground after an early advance but still ended the day modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.2 basis points to 4.016 percent.

The ten-year yield closed lower for the third straight session after reaching its highest closing level in over two months last Thursday.

Treasuries continued to benefit from optimism about the outlook for interest rates following the release of the latest inflation data.

The Labor Department released a report this morning showing a continued decrease by prices for U.S. imports in the month of September.

The report said import prices fell by 0.4 percent in September after slipping by a revised 0.2 percent in August. The decline matched economist estimates.

Compared to the same month a year ago, import prices edged down by 0.1 percent, marking the first year-over-year decrease since February.

"Import prices do not feed through directly to producer and consumer prices but are a signal inflationary pressures remain muted and adds some support to another rate cut in November," said Matthew Martin, Senior U.S. Economist at Oxford Economics.

The Labor Department also said export prices slid by 0.7 percent in September after slumping by a revised 0.9 percent in August. Economists had expected export prices to fall by 0.4 percent.

Export prices in September were down by 2.1 percent compared to the same month a year ago, reflecting the largest year-over-year decrease since January.

Following the latest batch of inflation data, CME Group's FedWatch tool is indicating a 94.2 percent chance the Federal Reserve will lower interest rates by a quarter point next month.

Trading on Thursday is likely to be driven by reaction to a slew of U.S. economic data, including reports on weekly jobless claims, retail sales and industrial production.