2021.06.1020:02:00UTC+00Treasuries Turn Positive After Seeing Early Weakness

After an early move to the downside, treasuries turned higher over the course of the trading session on Thursday.

Bond prices climbed well off their early lows to end the day firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3 basis points to 1.459 percent after reaching a high of 1.533 percent.

With the drop on the day, the ten-year yield extended a recent downward trend, ending the session at its lowest closing level in three months.

The higher close by treasuries came following the release of a highly anticipated Labor Department report showing a bigger than expected increase in consumer prices in the month of May.

The Labor Department said its consumer price index rose by 0.6 percent in May after climbing by 0.8 percent in April. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices climbed by 0.7 percent in May following a 0.9 percent advance in April. Core prices were also expected to rise by 0.4 percent.

The report also showed consumer prices in May were up by 5.0 percent compared to the same month a year ago, reflecting the biggest spike since August of 2008.

The annual rate of core consumer price growth also accelerated to 3.8 percent in May, which represents the biggest jump since June of 1992.

"Price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated and sticky as supply/demand imbalances are only gradually resolved," said Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics.

She added, "While we share the Fed's view that this isn't the start of an upward inflationary spiral, we look for inflation to remain persistently above 2% through 2022."

Adding to positive sentiment about the economy, the Labor Department released a separate report showing another modest decrease in first-time claims for unemployment benefits.

The report showed initial jobless claims edged down to 376,000, a decrease of 9,000 from the previous week's unrevised level of 385,000. Economists had expected jobless claims to dip to 370,000.

With the slight drop, jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

Bond prices saw further upside after the Treasury Department revealed this month's auction of $24 billion worth of thirty-year bonds attracted average demand.

Trading on Friday may be impacted by reaction to the University of Michigan's preliminary report on consumer sentiment in the month of June.