Treasuries Show Substantial Rebound Following PPI Data

(RTTNews) - Following the steep drop seen during Wednesday's session, treasuries showed a strong move back to the upside during trading on Thursday.

Bond prices surged in morning trading and remained firmly positive throughout the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 11.2 basis points to 4.525 percent.

The ten-year yield more than offset the 10.0 basis point spike seen in the previous session but remains well off its recent one-month lows.

The substantial rebound by treasuries came after the Labor Department released its report on producer price inflation in the month of January.

While the headline number rose by more than expected, components of the Federal Reserve's preferred inflation reading were relatively tame.

The Labor Department said its producer price index for final demand rose by 0.4 percent in January after climbing by an upwardly revised 0.5 percent in December.

Economists had expected producer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Meanwhile, the report said the annual rate of producer price growth in January was unchanged from an upwardly revised 3.5 percent in December.

The annual rate of producer price growth was expected to slow to 3.2 percent from the 3.3 percent originally reported for the previous month.

"As in the CPI report, a big increase in energy prices and eggs pushed up the PPI in January," said Bill Adams, Chief Economist for Comerica Bank. "There was also a big upward contributions from hotel and motel rates."

He added, "However, the PPI also saw flat or negative readings on most types of healthcare services, which points to a cooler core PCE inflation report for January than the month's core CPI, which rose 0.4%."

A separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits fell by slightly more than expected in the week ended February 8th.

Trading on Friday may be impacted by reaction to reports on U.S. retail sales, import and export prices and industrial production.