Treasuries See Further Downside Amid Jump In Oil Prices

(RTTNews) - Extending the sharp pullback seen over the course of the two previous sessions, treasuries saw some further downside on Wednesday.

Bond prices moved notably lower in morning trading but regained some ground going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 1.819 percent.

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

The continued weakness among treasuries was partly due to a sharp increase by the price of crude oil, which has seen considerable volatility in recent sessions.

Crude oil for March delivery jumped $1.62 to $30.66 a barrel on the day after slipping $0.40 to $29.04 a barrel on Tuesday.

The rally by the price of crude oil came amid news Iranian Oil Minister Bijan Zanganeh has offered support for a plan to maintain a ceiling on oil production.

According to Reuters, Zanganeh told the Shana news agency Iran supports "any effort to stabilize the market and prices."

Treasuries regained some ground late in the day following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes suggested some members of the Federal Open Market Committee were concerned about the downside risks posed by the recent tightening of global financial conditions.

Participants discussed altering their earlier views of the appropriate path for interest rates and agreed to closely monitor global economic and financial developments.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The chances of a March rate hike are still very slim, particularly in light of the most recent comments from Fed officials, but we think the Fed will resume hiking interest rates later this year."

"By the middle of this year, fears of a collapse in both China and the U.S. should have faded and rising domestic price pressures will be even harder to ignore," he added.

On the U.S. economic front, the Fed released a report shortly before the start of trading showing a bigger than expected increase in industrial production in the month of January.

The Fed said industrial production climbed by 0.9 percent in January after falling by a revised 0.7 percent in December. Economists had expected production to rise by 0.4 percent.

A separate report from the Labor Department showed an unexpected uptick in producer prices in the month of January, while the Commerce Department reported a steep drop in housing starts during the month.

In light of the recent focus on oil prices, the weekly report on oil inventories may attract attention on Thursday along with reports on weekly jobless claims and Philadelphia-area manufacturing activity.