Treasuries Close Modestly Higher After Early Volatility

(RTTNews) - After seeing some volatility in early trading, treasuries moved modestly higher over the course of the trading day on Tuesday.

Bond prices initially bounced back and forth across the unchanged line but eventually settled in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.8 basis points to 2.322 percent.

The modest strength among treasuries was partly attributed to a notable decrease by the price of crude oil, with crude for December delivery sliding $1.03 to $74.61 a barrel.

With the price of crude oil near four-year lows, analysts have suggested that inflation is likely to remain subdued, allowing the Federal Reserve to delay raising interest rates.

Traders largely shrugged off a report from the Labor Department showing an unexpected increase in producer prices, as the price growth was attributed to a statistical quirk.

The Labor Department said its producer price index for final demand rose by 0.2 percent in October after edging down by 0.1 percent in September.

The modest increase in prices came as a surprise to economists, who had expected the index to dip by another 0.1 percent.

Excluding food and energy prices, the core producer price index climbed by 0.4 percent in October after coming in unchanged in September. Core prices were expected to inch up by 0.1 percent.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "We suspect that the bulk of the larger-than-expected rise in U.S. producer prices in October is due to a statistical quirk related to the effects of the lower gasoline price."

"Nonetheless, the stronger economy should still put upward pressure on core PPI inflation over the next year," he added.

A separate report on new residential construction may attract attention on Wednesday, although traders are also likely to keep a close eye on the minutes of the latest Fed meeting.