Treasuries See Further Downside Ahead Of Inflation Data

Treasuries moved moderately lower during trading on Tuesday, extending the downward trend seen over the past several sessions.

After moving to the downside in morning trading, bond prices remained firmly negative throughout the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 1.342 percent.

With the increase on the day, the ten-year yield closed higher for the sixth straight session, reaching its highest closing level in almost a month.

Treasuries saw further downside as economic optimism following last Friday’s upbeat monthly jobs data continued to reduce the appeal of bonds.

News that the Senate has approved a $1 trillion infrastructure bill may also have weighed on bonds. The package now heads to the House, where it faces an uncertain future.

Traders were also looking ahead to the release of the Labor Department’s report on consumer price inflation in the month of July on Wednesday.

Economists currently expect consumer prices to climb by 0.5 percent in July after advancing by 0.9 percent in June. The annual rate of consumer price growth is expected to slow to 5.3 percent from 5.4 percent.

Core consumer prices, which exclude food and energy prices, are expected to rise by 0.4 percent in July following a 0.9 percent increase in June. Year-over-year core price growth is expected to drop to 4.3 percent from 4.5 percent.

The Labor Department is scheduled to release a separate report on producer price inflation in the month of July on Thursday.

The inflation data could have an impact on the outlook for monetary policy, although the next Federal Reserve meeting is not scheduled until September.

Meanwhile, bond traders largely shrugged off the results of the Treasury Department’s auction of $58 billion worth of three-year notes, which attracted above average demand.

Trading on Wednesday is likely to be driven by reaction to the report on consumer price inflation, which could impact estimates for when the Fed will begin scaling back its asset purchases.

The Treasury Department is also scheduled to announce the results of this month’s auction of $41 billion worth of ten-year notes.

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