During Wednesday's trading session, Treasury markets initially lacked clear direction but ultimately experienced a downward trend. Bond prices entered and remained in negative territory as the session progressed, marking an extension of losses from the previous two days. Consequently, the yield on the benchmark ten-year note rose by 5.0 basis points, reaching 4.271 percent. This marks the third consecutive session the ten-year yield has closed higher since hitting a monthly low last Friday.
The slide in Treasury prices coincided with the release of key consumer price inflation data, which aligned with economists' predictions. According to the Labor Department, the consumer price index increased by 0.3 percent in November, following a steady 0.2 percent rise over the past four months. This rate of increase met expectations.
On an annual basis, consumer price growth edged up to 2.7 percent in November from 2.6 percent in October, aligning with forecasts. Core consumer prices, which exclude food and energy, also rose by 0.3 percent in November. This increase matched the pace observed in the preceding three months and was in line with projections.
Year-over-year, core consumer prices saw a 3.3 percent rise in November, maintaining the same growth as October and meeting expectations. Despite the persistent inflation, the Federal Reserve is widely anticipated to cut interest rates by 25 basis points next week. However, the continued strength in annual price growth raises concerns about a potentially slower pace of rate cuts next year than previously expected.
ING Chief International Economist James Knightley commented, "The Fed seems content to gradually steer policy towards a neutral level of around 3%, and we anticipate another 25bp rate cut next week." She further noted, "The lack of substantial progress on inflation means that in their economic projections, officials may hint at just three rate cuts in 2025, compared to the four forecasted in September."
Despite weakening further during the afternoon, Treasury markets remained subdued even after the Treasury Department's announcement that the auction of $39 billion in ten-year notes witnessed stronger-than-average demand. Looking ahead to Thursday, reports on November's producer price inflation and weekly jobless claims are likely to draw market attention.
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