2022.05.1119:18:00UTC+00Treasuries See Further Upside Amid Continued Weakness On Wall Street

After seeing significant volatility early in the session, treasuries moved notably higher over the course of the trading day on Wednesday.

Bond prices pulled back off their best levels going into the close but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.2 basis points to 2.921 percent.

The ten-year yield moved lower for the third straight session, continuing to give back ground after reaching its highest levels since November 2018.

Treasuries seemed to benefit from their appeal as a safe haven amid continued weakness on Wall Street, with the major averages once again falling to their lowest intraday levels in over a year.

The weakness on Wall Street came as traders digested a highly anticipated Labor Department report showing the annual rate of consumer price growth slowed by less than expected.

While the report showed the annual rate of consumer price growth slowed to 8.3 percent in April from a 40-year high of 8.5 percent in March, economists had expected the pace of growth to slow to 8.1 percent.

The annual rate of growth in core consumer prices also slowed to 6.2 percent in April from 6.5 percent in March, although the rate was expected to decelerate to 6.0 percent.

On a monthly basis, the Labor Department said its consumer price index rose by 0.3 percent in April after surging by 1.2 percent in March. Economists had expected prices to edge up by 0.2 percent.

Core consumer prices, which exclude food and energy prices, climbed by 0.6 percent in April after rising by 0.3 percent in March. Core prices were expected to increase by 0.4 percent.

The data has added to recent concerns the Federal Reserve will raise interest rates more aggressively in an effort to bring inflation down at a faster rate.

Traders have recently expressed concerns more aggressive moves by the Fed and other central banks could lead to a period of stagflation or an outright recession.

Bond prices saw continued strength after the Treasury Department revealed this month's auction of $36 billion worth of ten-year notes attracted average demand.

The ten-year note auction drew a high yield of 2.943 percent and a bid-to-cover ratio of 2.49, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.51.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

On Tuesday, the Treasury revealed this month's auction of $45 billion worth of three-year notes attracted well above average demand.

The Treasury is due to announce the results of this month's auction of $22 billion worth of thirty-year bonds on Thursday.

Looking ahead, trading on Thursday may also be impacted by reaction to reports on producer price inflation and initial jobless claims.