Treasuries Finish Choppy Trading Day Modestly Higher

(RTTNews) - Following the pullback seen in the previous session, treasuries showed a lack of direction throughout much of the trading day on Wednesday.

Bond prices sent most of the day lingering near the unchanged line before closing modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.0 basis points to 4.280 percent.

The choppy trading seen for much of the session came as traders seemed reluctant to make significant moves ahead of the release of closely watched consumer price inflation data on Thursday.

Economists expect the annual rate of consumer price growth to slow to 3.1 percent in June from 3.3 percent in May, while the annual rate of core consumer price growth is expected to hold at 3.4 percent.

During congressional testimony, Federal Reserve Chair Jerome Powell said more "good data" would strengthen the central bank's confidence inflation is moving sustainably toward its 2 percent target and lead to a potential interest rate cut.

Powell also warned of the risk that leaving interest rates at an elevated level for too long could jeopardize economic growth.

"In light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face," he said. "Reducing policy restraint too late or too little could unduly weaken economic activity and employment."

The modestly higher close may have reflected buying interest generated in reaction to the results of the Treasury Department's auction of $39 billion worth of ten-year notes, which attracted modestly above average demand.

The ten-year note auction drew a high yield of 4.276 percent and a bid-to-cover ratio of 2.58, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.51.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Trading on Thursday is likely to be driven by reaction to the Labor Department's report on consumer price inflation and the data's impact on the outlook for interest rates.