US Treasuries climb as inflation worries wane

Yield on the benchmark note had fallen as much as 16 basis points since Monday, following July data showing the price of goods leaving US factory gates unexpectedly fell and consumer prices rose at a slower pace.

Prices on the 10-year note, which move inversely to yields, have had their best three-day run in nearly a year, which traders said was spurred by increased expectations the Fed will not have to raise interest rates in September to stifle price increases.

“It is more technical this morning,” said George Goncalves, Treasury and agency trading strategist with Banc of America Securities in New York. After this week’s key inflation reports and with little data on Thursday, “for the time being there is not much to suppress or hold prices down -- it is pretty much a follow-on from yesterday.”

Signs that price pressures are easing are a boon to bonds in two ways. In addition to making it more likely the Fed will extend its pause in rate hikes, slowing inflation helps to preserve a bond’s value over time.

The 10-year note US10YTRR_was trading 3/32 higher in price as of early on Thursday for a yield of 4.85 percent from a yield of 4.87 percent late on Wednesday.

Easing inflation pressures took on some of the tone of a global phenomenon on Thursday with a report showing tamer-than-expected consumer prices in the euro zone which helped push euro zone government bond prices higher.

Two-year Treasury notes US2YTRR were trading steady in price for a yield of 4.88 percent, while 5-year notes US5YTRR were 1/32 higher in price for a yield of 4.79 percent from 4.80 percent.

Thirty-year bonds US30YTRR were 6/32 higher in price for a yield of 4.98 percent from 5.00 percent.

Data on Thursday showed US jobless claims eased to 312,000 in the week ended Aug. 12, near expectations of a reading of 315,000 and down from a revised 322,000 in the prior week.