Treasuries Skyrocket Following Tamer Than Expected Inflation Data

After closing roughly flat for two consecutive sessions, treasuries showed a substantial move to the upside during trading on Tuesday.

Bond prices skyrocketed early in the trading day and remained sharply higher throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 19.1 basis points to 4.441 percent.

With the steep drop on the day, the ten-year yield tumbled to its lowest closing level in almost two months.

The surge by treasuries came following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of October.

The Labor Department said its consumer price index was unchanged in October after climbing by 0.4 percent in September. Economists had expected consumer prices to inch up by 0.1 percent.

Excluding food and energy prices, core consumer prices edged up by 0.2 percent in October after rising by 0.3 percent in September. Core prices were expected to rise by another 0.3 percent.

The report also said the annual rate of consumer price growth slowed to 3.2 percent in October from 3.7 percent in September. Economists had expected the pace of growth to decelerate to 3.3 percent.

Core consumer prices were up by 4.0 percent compared to the same month a year ago, reflecting the smallest year-over-year increase since September 2021.

The annual rate of core consumer price growth was expected to come in unchanged from 4.1 percent in the previous month.

Michael Pearce, Lead U.S. Economist at Oxford Economics, said the slowdown in core price growth should “give Fed officials more confidence that inflation is on a firm downward trajectory, staying its hand for rate hikes.”

Economic data is likely to remain in focus on Wednesday, with traders likely to keep a close eye on reports on retail sales, producer prices and New York manufacturing.

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