2024.02.2919:07:00UTC+00Treasuries Close Modestly Higher Following Inflation Data

Treasuries moved to the upside during trading on Thursday amid a positive reaction to closely watched readings on consumer price inflation.

Bond prices gave back some ground after an early advance but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.2 basis points to 4.252 percent.

The early upward move by treasuries came following the release of a highly anticipated Commerce Department report showing consumer prices in the U.S. increased in line with economist estimates in the month of January.

The Commerce Department said consumer prices rose by 0.3 percent in January after inching up by a revised 0.1 percent in December.

Economists had expected consumer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

Excluding food and energy prices, core consumer prices climbed by 0.4 percent in January after edging up by a revised 0.1 percent in December. The increase in core prices also matched estimates.

Meanwhile, the report said the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December. The slowdown matched expectations.

The annual rate of core consumer price growth also slowed to 2.8 percent in January from 2.9 percent in December, in line with estimates.

"The report was largely in line with economist estimates, which was seen a relief for investors who were concerned about the potential for hotter than expected inflation to start the year," said Sam Millette, Director of Fixed Income for Commonwealth Financial Network.

The inflation readings are said to be favored by the Federal Reserve, and the data generated some optimism about the outlook for interest rates.

Buying interest waned somewhat over the course of the session, however, as there remains some uncertainty about when the Federal Reserve will begin cutting rates.

"The narrative has not changed that the next move by the Fed will be a cut in rates but the persistence of services inflation likely pushes out the timing of that first cut," said Jeffrey Roach, Chief Economist for LPL Financial.

In other U.S. economic news, the Labor Department released a report showing a bigger than expected increase in weekly jobless claims, while a report from the National Association of Realtors unexpectedly showed a sharp pullback by pending home sales in January.

Trading on Friday may be impacted by reaction to the latest U.S. economic data, including reports on manufacturing activity, construction spending and consumer sentiment.