After an initial move to the upside, treasuries came under considerable selling pressure over the course of the trading session on Thursday.
Bond prices pulled back into negative territory and saw further downside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 11.7 basis points to 4.712 percent.
The ten-year yield showed a notable rebound after plunging by 18.4 basis points over the two previous session but remains well off its recent sixteen year highs.
The sharp pullback by treasuries came after the Labor Department released a report showing U.S. consumer prices rose by slightly more than expected in the month of September.
The Labor Department said its consumer price index climbed by 0.4 percent in September after increasing by 0.6 percent in August. Economists had expected consumer prices to rise by 0.3 percent.
Excluding food and energy prices, core consumer prices rose by 0.3 percent in September, matching the increase seen in August as well as economist estimates.
The report also said the annual rate of consumer price growth was unchanged at 3.7 percent, while the annual rate of core consumer price growth slowed to 4.1 percent in September from 4.3 percent in August.
Treasuries came under pressure even though most economists do not expect the data to convince the Federal Reserve to resume raising interest rates next month.
“As it pertains to Fed policy, today’s CPI data doesn’t provide additional impetus for the Fed to act at the upcoming November 1 meeting,” said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management.
He added, “Overall, consumer price data continues to be on track to moving towards the Fed’s stated two-percent target, but it’s likely we will continue to see some bumps along the way like the small upside surprise today.”
The Labor Department also released a separate report showing first-time claims for U.S. unemployment benefits came in unchanged in the week ended October 7th.
The report said initial jobless claims came in at 209,000, unchanged compared to the previous week’s revised level. Economists had expected jobless claims to inch up to 210,000 from the 207,000 originally reported for the previous week.
Looking ahead, a report on import and export prices in September and a preliminary reading on consumer sentiment in October may attract attention on Friday.
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