Treasuries Give Back Ground Following Inflation Data

(RTTNews) - After moving notably higher over the two previous sessions, treasuries gave back some ground during trading on Friday.

Bond prices came under pressure in morning trading and remained firmly negative throughout the week. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.2 basis points to 1.341 percent.

The pullback by treasuries came following the release of a Labor Department report showing producer prices in the U.S. increased by slightly more than expected in the month of August.

The Labor Department said its producer price index for final demand climbed by 0.7 percent in August after jumping by 1.0 percent for two straight months. Economists had expected producer prices to increase by 0.6 percent.

With another monthly increase, the annual rate of growth in producer prices accelerated to 8.3 percent in August from 7.8 percent in July, reflecting the largest advance since 12-month data were first calculated in November 2010.

Excluding prices for food, energy and trade services, core producer prices rose by 0.3 percent in August following a 0.9 percent advance in July. Core prices were expected to rise by 0.4 percent.

The annual rate of growth in core producer prices also ticked up to 6.3 percent in August from 6.1 percent in July, showing the largest year-over-year increase since data were first calculated in August 2014.

"While last month's increase in producer prices was slower than the prior two months, the latest gain drove headline and core PPI inflation to fresh record highs," Mahir Rasheed, U.S. Economist at Oxford Economics.

"However, price pressures continue to be driven by virus-sensitive sectors that will improve as supply and demand patterns normalize further," he added. "Still, the ongoing supply disruptions will keep producer prices sticky."

Next Tuesday, the Labor Department is scheduled to release a separate report on consumer price inflation in the month of August.

Reports on retail sales, industrial production, import and export prices, consumer sentiment and regional manufacturing activity may also attract attention next week.