Treasuries Extend Yesterday's Rebound Following Inflation Data

(RTTNews) - Treasuries moved to the upside on Friday following the release of closely watched U.S. inflation data, extending the rebound seen in the previous session.

Bond prices gave back some ground in afternoon trading after an early rally but remained firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 4.0 basis points to 4.514 percent.

The ten-year yield added to the 7.0 basis point drop seen on Thursday, pulling back further off its highest levels in almost a month.

The continued strength among treasuries came after the Commerce Department released a report showing consumer prices in the U.S. increased in line with economist estimates in the month of April, while core consumer prices edged up by slightly less than expected.

The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.3 percent for the third straight month in April, matching economist estimates.

Meanwhile, the report said the core PCE price index, which excludes food and energy prices, crept up by 0.2 percent in April after rising by 0.3 percent in March. Economists had expected another 0.3 percent increase.

The annual rates of growth by the PCE price index and the core PCE price index were both unchanged from the previous month at 2.7 percent and 2.8 percent, respectively. The readings matched expectations.

"An important question for the Fed that has been raised within the FOMC as well as among former Fed officials is whether the focus on reaching 2% is appropriate and if 2.5-3% is a more realistic goal," said Quincy Krosby, Chief Global Strategist for LPL Financial.

She added, "To be sure, the FOMC and Chair Powell have never suggested that monetary easing requires reaching 2%, but they must see progress that inflation is moving closer to the target."

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department's report on personal income and spending.

The Labor Department's monthly jobs report is likely to be in the spotlight next week, while reports on manufacturing and service sector activity may also attract attention.