2024.01.1119:13:00UTC+00Treasuries Close Firmly Positive On Late-Day Strength

Treasuries showed a lack of direction throughout much of the trading day on Thursday before showing a strong move to the upside in the latter part of the session.

Bond prices rallied going into the close after spending most of the session lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.3 basis points to 3.977 percent.

The choppy trading seen for most of the day came as traders digested the Labor Department's highly anticipated report on consumer price inflation in December, which showed prices rose by slightly more than expected.

The Labor Department said its consumer price index climbed by 0.3 percent in December after inching up by 0.1 percent in November. Economists had expected consumer prices to rise by 0.2 percent.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in December, matching the increase seen in November as well as economist estimates.

The report also showed the annual rate of consumer price growth accelerated to 3.4 percent in December from 3.1 percent in November. The annual rate of growth was expected to tick up to 3.2 percent.

Meanwhile, the annual rate of growth by core consumer prices slowed to 3.9 percent in December from 4.0 percent in November. Economists had expected the pace of core price growth to decelerate to 3.8 percent.

A number of economists have said the data makes the Federal Reserve less likely to cut interest rates in March, with many predicting the central bank will hold off until its May meeting.

Nonetheless, persistent optimism about a March rate cut may have contributed to the late-day strength among treasuries, with CME Group's FedWatch Tool currently still indicating a 68.1 percent chance the Fed will lower rates.

The late-day rally by treasuries also came after the Treasury Department revealed this month's sale of $21 billion worth of thirty-year bonds attracted average demand.

The thirty-year bond auction drew a high yield of 4.229 percent and a bid-to-cover ratio of 2.37, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.38.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Trading on Friday may be impacted by reaction to a report on producer price inflation, although the data typically attracts less attention than the consumer price inflation report.