Treasuries Come Under Pressure Following Inflation Data

(RTTNews) - After seeing considerable volatility early in the session, treasuries moved notably lower over the course of the trading day on Tuesday.

Bond prices came under pressure as the morning progressed and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.4 basis points to 4.155 percent.

With the increase on the day, the ten-year yield continued to regain ground after ending last Friday's trading at its lowest closing level in a month.

The weakness among treasuries came following the release of the Labor Department's highly anticipated report on consumer price inflation in the month of February.

The Labor Department said its consumer price index climbed by 0.4 percent in February after rising by 0.3 percent in January. The increase matched economist estimates.

Excluding food and energy prices, core consumer prices also rose by 0.4 percent in February, matching the increase seen in January. Economists had expected core prices to rise by 0.3 percent.

The report also said the annual rate of consumer price growth ticked up to 3.2 percent in February from 3.1 percent in January. The year-over-year growth was expected to be unchanged.

Meanwhile, the annual rate of core consumer price growth slowed to 3.8 percent in February from 3.9 percent in January. Economists had expected the pace of growth to decelerate to 3.7 percent.

While the data was largely in line with estimates, the slightly more modest expected slowdown in core price growth further reduced the already slim chances of an interest rate cut in May.

"With the inflation trend flattening," said FHN Financial Chief Economist Chris Low, "the FOMC has more cause to leave rates unchanged."

He added, "A March rate cut has already been entirely ruled out, but today's CPI data will solidify expectations the first cut will not come until June at the earliest."

A lack of major U.S. economic data may keep some traders on the sidelines on Wednesday ahead of the release of several key reports later in the week.