Treasuries Close Modestly Higher After Lackluster Trading Session

(RTTNews) - After ending the previous session roughly flat, treasuries showed a lack of direction throughout much of the trading day on Wednesday before closing modestly higher.

Bond prices moved to the upside in late-day trading after spending most of the session near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.1 basis points to 2.538 percent.

The choppy trading seen for much of the day came on the heels of the release of a mixed batch of U.S. economic data.

Early in the day, the Labor Department released a report showing that producer prices increased by more than expected in the month of June amid a rebound in energy prices.

The Labor Department said its producer price index for final demand rose by 0.4 percent in June following a 0.2 percent drop in May. Economists had expected prices to increase by about 0.2 percent.

Despite the monthly rebound, the Labor Department said the annual rate of producer price growth slowed to 1.9 percent in June from 2.0 percent in May.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "With PPI inflation running at about 2.0%, nothing here is going to worry the Fed, particularly not when crude oil prices have most recently fallen back."

A separate report from the Federal Reserve said industrial production edged up by 0.2 percent in June compared to economist estimates for an increase of about 0.4 percent.

While the report also said production growth in May was downwardly revised to 0.5 percent from 0.6 percent, the 0.3 percent drop in production reported for April was upwardly revised to unchanged.

Meanwhile, the National Association of Home Builders released a report showing that homebuilder confidence has improved by more than anticipated in the month of July.

The report said the NAHB/Wells Fargo Housing Market Index climbed to 53 in July from 49 in June, while economists had expected a more modest increase to a reading of 50.

The NAHB said homebuilder confidence reached an important milestone, as a reading above 50 indicates that more builders view sales conditions as good than poor.

Later in the day, the Fed released its Beige Book, which contains anecdotal evidence on economic conditions from each of the twelve Fed districts.

The Fed said all twelve districts indicated that economic activity continued to expand, with the pace of growth characterized as moderate or modest.

Traders seemed to shrug off Fed Chair Janet Yellen's second day of testimony on Capitol Hill, as her remarks largely seemed to mirror those she delivered yesterday.

Another batch of U.S. economic data is scheduled to be released on Thursday, with traders likely to keep an eye on reports on weekly jobless claims, housing starts, and Philadelphia-area manufacturing activity.