Treasuries Regain Ground Amid Optimism About Inflation Peak

Following the sharp pullback seen over the course of the previous session, treasuries regained some ground during trading on Friday.

Bond prices moved to the upside early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.9 basis points to 2.849 percent.

With the drop on the day, the ten-year yield partly offset the 10.2 basis point spike seen during trading on Thursday.

Optimism that inflation has peaked contributed to the rebound by treasuries following this week’s tamer than expected readings on consumer and producer prices.

Adding to the positive sentiment about inflation, the Labor Department released a report showing U.S. import prices fell by more than expected in the month of July.

The Labor Department said import prices slumped by 1.4 percent in July after rising by an upwardly revised 0.3 percent in June. The decrease reflected the first drop in import prices since December 2021.

Economists had expected import prices to decline by 1.0 percent compared to the 0.2 percent uptick originally reported for the previous month.

The report also showed export prices tumbled by 3.3 percent in July after climbing by 0.7 percent in June. Export prices were expected to decrease by 1.1 percent.

Meanwhile, the University of Michigan released a separate showing consumer sentiment in the U.S. has improved by much more than expected in the month of August.

The report showed the consumer sentiment index jumped to 55.1 in August from 51.5 in July. Economists had expected the index to inch up to 52.5.

With the bigger than expected increase, the consumer sentiment index continued to recover after hitting a record low 50.0 in June.

The University of Michigan also said one-year inflation expectations dipped to 5.0 percent in August from 5.2 percent in July, while five-year inflation expectations crept up 3.0 percent from 2.9 percent.

Surveys of Consumers Director Joanne Hsu noted one-year inflation expectations fell to the lowest level since February but were still well above the 4.6 percent reading from a year ago.

Reports on retail sales and industrial production are likely to attract attention next week along with a slew of housing data.

Traders are also likely to keep an eye on the minutes of the latest Federal Reserve meeting, looking for additional clues about the outlook for interest rates.

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