Treasury bonds experienced a significant increase on Thursday, continuing their robust upward trend from the previous day. Bond prices initially showed little movement in the early session but progressively shifted to positive territory. Consequently, the yield on the benchmark ten-year note, which inversely correlates with its price, fell by 4.7 basis points, landing at 4.606 percent.
This marks the third consecutive session where the ten-year yield closed lower, after reaching its highest closing level in over a year on Monday.
The renewed strength in the bond market followed comments from Federal Reserve Governor Christopher Waller, who mentioned to CNBC that the central bank could potentially lower interest rates multiple times this year, contingent upon anticipated reductions in inflation.
"As long as the data remain favorable regarding inflation, or continue in that trajectory, I definitely can envision rate cuts occurring sooner than market expectations," Waller remarked during an interview on CNBC’s "Squawk on the Street."
Waller indicated that the number of rate cuts would be data-dependent, suggesting that the Federal Reserve might implement rate cuts three to four times if significant progress is made with inflation, or perhaps only once or twice if inflation proves more persistent.
The ongoing rise in treasury bonds was also influenced by a series of U.S. economic reports, encompassing weekly jobless claims, retail sales, and import prices data.
According to the Labor Department, initial jobless claims rose to 217,000 for the week ending January 11th, an increase of 14,000 from the previous week's revised figure of 203,000. Economists had projected jobless claims would increase to 210,000.
The larger-than-expected rise followed a drop in jobless claims to their lowest since reaching 200,000 during the week ending February 17, 2024.
Additionally, the Commerce Department reported that retail sales in the U.S. experienced a lower-than-anticipated growth in December.
Retail sales climbed by 0.4 percent in December, following an upwardly revised increase of 0.8 percent in November. Economists had expected a rise of 0.6 percent.
In contrast, core retail sales, which exclude automobiles, gasoline, building materials, and food services, rose by 0.7 percent in December, following a 0.4 percent increase in November.
"Retail sales in December were buoyed by a price-related increase in gasoline station sales, although the details were mostly positive, with broad underlying growth in the control group," commented Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.
Following the recent consumer price inflation report, the Labor Department also released data indicating that U.S. import prices slightly increased in December, aligning with estimates.
Import prices edged up by 0.1 percent in December, consistent with the increases observed in November and October, as well as forecasts.
"December saw a modest rise in import prices, rounding off a hopeful week for inflation data and keeping the Fed on course to cut rates in the year's first half," noted Matthew Martin, Senior U.S. Economist at Oxford Economics.
He added, "The recent increase in global oil prices will lead to higher fuel import prices and some fluctuations in the data, but we anticipate the Fed will overlook any temporary inflation sources."
Looking ahead, the U.S. economic schedule for Friday is relatively light, though reports on industrial production and housing starts may still garner attention.
The material has been provided by InstaForex Company -
www.instaforex.com
