Treasuries Finish Volatile Session Roughly Flat

(RTTNews) - Treasuries fluctuated over the course of the trading session on Wednesday before eventually ending the day nearly unchanged.

Bond prices recovered from an early pullback but moved back to the downside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by less than a basis point to 3.653 percent.

The ten-year yield closed higher for the first time in seven sessions, climbing off its lowest closing level in over a year.

The volatility on the day came following the release of the Labor Department's closely watched report on consumer price inflation in the month of August.

While the report showed consumer prices increased in line with economist estimates, core consumer prices rose by slightly more than expected.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the uptick seen in July as well as economist estimates.

However, core consumer prices, which exclude food and energy prices, climbed by 0.3 percent in August after rising by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

The Federal Reserve is still likely to lower interest rates next week, but the bigger than expected increase by core consumer prices is seen as reducing the chances the central bank lowers rates by 50 basis points.

Following the report, CME Group's FedWatch Tool is indicating an 87.0 percent chance of a quarter point rate cut and just a 13.0 percent chance of a half-point rate cut.

The report also said the annual rate of consumer price growth slowed to 2.5 percent in August from 2.9 percent in July. Economists had expected the year-over-year growth to decelerate to 2.6 percent.

The annual rate of core consumer price growth was unchanged from the previous month at 3.2 percent in August, in line with economist estimates.

Trading on Thursday may be impacted by reaction to separate Labor Department reports on producer price inflation and weekly jobless claims.