Treasuries Close Modestly Higher After Early Volatility

(RTTNews) - After initially showing a lack of direction, treasuries moved modestly higher over the course of the trading session on Tuesday.

Bond prices moved to the upside in late morning trading before moving roughly sideways thereafter. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.7 basis points to 1.749 percent.

With the drop on the day, the ten-year yield pulled back further off the four-month closing high that it set last Friday.

The modestly higher close by treasuries came after the Labor Department released a report showing that consumer prices rose in line with economist estimates in the month of September.

The Labor Department said its consumer price index climbed by 0.3 percent in September after edging up by 0.2 percent in August.

Excluding food and energy prices, the core consumer price index inched up by 0.1 percent in September after increasing by 0.3 percent in August. Economists had expected core prices to rise by 0.2 percent.

The annual rate of consumer price inflation accelerated to 1.5 percent in September from 1.1 percent, while the core rate slowed to 2.2 percent from 2.3 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted core inflation has been range-bound between 2.1 percent and 2.3 percent since December of last year.

"With the rate at which labor market slack is being absorbed also slowing this year, the stabilization in core inflation supports the Fed's cautious approach to normalizing interest rates," Ashworth said.

A separate report from the National Association of Home Builders showed a pullback in homebuilder confidence in the month of October.

The report said the NAHB/Wells Fargo Housing Market Index dipped to 63 in October after jumping to an eleven-month high of 65 in September. The drop by the index matched economist estimates.

Wednesday morning, the Commerce Department is scheduled to release its report on new residential construction in the month of September.

Housing starts are expected to climb to an annual rate of 1.180 million in September after tumbling to a rate of 1.142 million in August.

Trading on Wednesday may also be impacted by reaction to the Federal Reserve's Beige Book, which could shed some additional light on the outlook for interest rates.