Treasuries Close Nearly Flat As Fed Meeting Looms

(RTTNews) - After failing to sustain an initial upward move, treasuries showed a lack of direction over the course of the trading session on Friday before closing nearly flat.

Bond prices spent much of the day lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.701 percent.

The choppy trading seen for most of the session came as traders seemed reluctant to make any significant moves ahead of the Federal Reserve's monetary policy announcement next week.

The Fed is scheduled to hold a two-day monetary policy beginning next Tuesday, with its decision due to be announced next Wednesday afternoon.

A report from the Labor Department showing an acceleration in consumer price growth raised some concerns about the outlook for interest rates, but analysts largely said the report will not be enough to push the Fed to raise rates next week.

Steve Murphy, U.S. economist at Capital Economics, said, "Overall, the August CPI report shows that domestic price pressures continue to build, but only very gradually."

"The annual rate of core PCE inflation, which is the Fed's preferred measure, has been stuck at 1.6% for most of this year," he added. "This suggests the Fed will likely wait until December before raising rates."

The Labor Department said its consumer price index rose by 0.2 percent in August after coming in unchanged in July. Economists had expected prices to inch up by 0.1 percent.

Excluding food and energy prices, core consumer prices climbed by 0.3 percent in August after edging up by 0.1 percent in July. Core prices had been expected to rise by 0.2 percent.

Compared to the same month a year ago, the headline consumer price index was up by 1.1 percent in August, reflecting an acceleration from the 0.8 percent growth in July.

The annual rate of core consumer price growth also accelerated to 2.3 percent in August from 2.2 percent in the previous month.

The Fed announcement will be in the spotlight next week, likely overshadowing a trio of reports on the strength of the house market.