Treasuries See Further Upside Following Yesterday's Rally

(RTTNews) - Treasuries moved notably higher over the course of the trading day on Thursday, extending the strong upward move seen in the previous session.

Bond prices showed a lack of direction early in the session but climbed firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.7 basis points to 4.606 percent.

The ten-year yield closed lower for the third consecutive session after ending Monday's trading at its highest closing level in over a year.

The strength that emerged in the bond market came after Federal Reserve Governor Christopher Waller told CNBC the central bank could lower interest rates multiple times this year if inflation eases as he is expecting.

"As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in," Waller said during an interview with Sara Eisen on CNBC's "Squawk on the Street."

Waller said the number of rate cuts would be driven by the data, suggesting the Fed could cut rates three or four times if there is a lot of progress on inflation or cut rates twice or only once if inflation remains sticky.

The continued advance by treasuries also came following the release of a slew of U.S. economic data, including reports on weekly jobless claims, retail sales and import prices.

The Labor Department released a report showing initial jobless claims climbed to 217,000 in the week ended January 11th, an increase of 14,000 from the previous week's revised level of 203,000. Economists had expected jobless claims to rise to 210,000.

The bigger than expected increase came after jobless claims fell to their lowest level since hitting 200,000 in the week ended February 17, 2024.

The Commerce Department also released a report showing retail sales in the U.S. increased by less than expected in the month of December.

The report said retail sales rose by 0.4 percent in December after advancing by an upwardly revised 0.8 percent in November. Economists had expected retail sales to climb by 0.6 percent.

Meanwhile, the report said core retail sales, which exclude automobiles, gasoline, building materials and food services, climbed by 0.7 percent in December after rising by 0.4 percent in November.

"Retail sales in December were flattered by a price-related increase in gasoline station sales, but the details were generally encouraging, with a broad-based underlying control group rising at a strong pace," said Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.

Following yesterday's more closely watched report on consumer price inflation, the Labor Department also released a report showing import prices in the U.S. crept up in line with estimates in the month of December.

The Labor Department said import prices inched up by 0.1 percent in December, matching the upticks seen in November and October as well as expectations.

"Import prices rose modestly in December, capping off an encouraging week of inflation data and keeping the Fed on track to cut rates in the first half of this year," said Matthew Martin, Senior U.S. Economist at Oxford Economics.

He added, "The recent rise in global oil prices will feed through to higher fuel import prices and some volatility to the data, but we expect the Fed will look through any temporary sources of inflation."

The U.S. economic calendar for Friday is relatively light, although reports in industrial production and housing starts may still attract some attention.