Treasuries Extend Modest Rebound Seen Last Friday

(RTTNews) - Following the modest rebound seen during last Friday's session, treasuries saw continued strength on Tuesday as trading resumed following the Columbus Day holiday on Monday.

Bond prices rose early in the session and saw further upside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.0 basis points to 4.038 percent.

The ten-year yield continued to give back ground after ending last Thursday's trading at its highest closing level in over two months.

Treasuries continued to benefit from optimism about the outlook for interest rates following last Friday's report on producer price inflation.

The Labor Department report showed producer prices were unexpectedly unchanged in September, while the annual rate price growth slowed modestly.

While hopes the Federal Reserve will lower rates by another 50 basis points next month have largely evaporated, the data reinforced optimism the central bank will cut rates by 25 basis points.

CME Group's FedWatch Tool is currently indicating a 92.2 percent chance the Fed will cut rates by a quarter point at its November meeting.

Treasuries may also have benefited from their appeal as a safe haven amid rising tensions in the Middle East and reports about China's extensive drills around Taiwan.

A report on import and export prices is likely to attract attention on Wednesday, although activity may be somewhat subdued ahead of the release of a slew of more closely watched data on Thursday.