After ending the previous session notably lower, treasuries regained some ground during the trading day on Wednesday.
Bond prices moved higher early in the session and remained positive throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.4 basis points to 2.963 percent.
The higher close by treasuries came following the release of a report from the Labor Department showing an unexpected drop in producer prices in the month of August.
The Labor Department said its producer price index for final demand edged down by 0.1 percent in August after coming in unchanged in July. Economists had expected prices to rise by 0.2 percent.
The unexpected drop in producer prices came as prices for final demand services dipped by 0.1 percent in August, matching the decrease seen in the previous month.
Over 80 percent of the decrease in prices for final demand services can be traced to margins for machinery and equipment wholesaling, which tumbled by 1.7 percent.
Excluding food and energy prices, core producer prices still edged down by 0.1 percent in August following a 0.1 percent uptick in July. Core prices had been expected to increase by 0.2 percent.
Treasuries remained positive following the release of the Federal Reserve’s Beige Book, which said the U.S. economy expanded at a moderate pace through the end of August.
The Fed’s Beige Book is a compilation of anecdotal evidence on economic conditions in the twelve Fed districts released shortly before the central bank makes its decision on monetary policy.
Meanwhile, traders largely shrugged off the results of the Treasury Department’s auction of $23 billion worth of ten-year notes, which attracted average demand.
The ten-year not auction drew a high yield of 2.957 percent and a bid-to-cover ratio of 2.58, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.62.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Looking ahead, the Treasury is due to finish off this week’s series of long-term securities auctions with the sale of $15 billion worth of thirty-year bonds on Thursday.
Trading on Thursday may also be impacted by reaction to reports on weekly jobless claims and consumer price inflation.