2023.03.3119:10:00UTC+00Treasuries Move Notably Higher Following Inflation Data

After turning in a relatively lackluster performance over the two previous sessions, treasuries showed a strong move to the upside during trading on Friday.

Bond prices moved modestly higher in early trading and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.7 basis points to 3.494 percent.

The strength among treasuries came following the release of a Commerce Department report showing an unexpected slowdown in the annual rate of core consumer price growth.

The report said core consumer prices, which exclude food and energy prices, jumped 4.6 percent year-over-year in February.

Annual price growth remains elevated, but this represents a slowdown from the 4.7 percent year-over-year spike in January. Economists had expected the pace of growth to be unchanged.

Including food and energy prices, the annual rate of consumer price growth also slowed to 5.0 percent in February from 5.3 percent in January. The pace of overall growth was also expected to be unchanged.

The Commerce Department said consumer prices rose by 0.3 percent on a monthly basis in February following a 0.6 percent advance in January. Economists had expected prices to increase by 0.4 percent.

Core consumer prices also increased by 0.3 percent on a monthly basis in February after climbing by 0.5 percent in January. Core prices were expected to edge up by 0.2 percent.

With the inflation readings said to be preferred by the Federal Reserve, the data had led to some optimism the central bank will hold off on raising interest rates at its next meeting in early May.

The Fed signaled last week that it expects just one more rate increase this year, leaving traders looking for clues about the timing of the final rate hike.

The monthly jobs report is likely to be in focus next week, although the data will be released while the markets are closed for Good Friday.

Ahead of the jobs report, traders are likely to keep an eye on reports on manufacturing and service sector activity, the U.S. trade deficit and private sector employment.