Treasuries Close Higher After Recovering From Initial Weakness

(RTTNews) - After recovering from an early move to the downside, treasuries moved higher over the course of the trading session on Tuesday.

Bond prices finished the day in positive territory, extending the upward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 3.6 basis points to 4.445 percent.

With the decrease on the day, the ten-year yield ended the session at its lowest closing level in over a month.

Treasuries initially came under pressure following the release of a Labor Department report showing producer prices in the U.S. increased by more than expected in the month of April.

The Labor Department said its producer price index for final demand climbed by 0.5 percent in April after a revised 0.1 percent dip in March.

Economists had expected producer prices to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

The report also said the annual rate of producer price growth accelerated to 2.2 percent in April from a downwardly revised 1.8 percent in March.

The year-over-year producer price growth was expected to inch up to 2.2 percent from the 2.1 percent originally reported for the previous month.

While the report initially generated renewed uncertainty about the outlook for interest rates, some economists pointed to the downward revisions to the March data as a positive sign.

"In effect, with the revision, the PPI rise was as expected. Proof of that was in the 2.2%, as-expected rise in the year-on-year PPI," said FHN Financial Chief Economist Chris Low. "Still, it is not all benign, as there is brewing pressure in the Core PPI."

Traders also kept an eye on remarks by Federal Reserve Chair Jerome Powell at the annual general meeting of the Foreign Bankers' Association.

Powell said the central bank needs to "be patient and let restrictive policy do its work," noting a lack of further progress on inflation during the first quarter.

The Fed chief also said his confidence inflation will slow towards the 2 percent target is "not as high as it was" but reiterated he does not expect the next move to be a rate hike.

With regard to the production inflation report, Powell said he'd call the data "mixed" rather than "hot" due the downward revisions to the March data.

Consumer price inflation data is likely to be in focus on Wednesday, although reports on retail sales and homebuilder confidence may also attract some attention.