WASHINGTON (dpa-AFX) - Following the modest rebound seen in the previous session, treasuries moved back to the downside during trading on Tuesday.
Bond prices moved lower early in the trading day and remained in negative territory for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 2.0 basis points to 4.293 percent.
The pullback by treasuries came following the release of the Labor Department's closely watched report on consumer price inflation in the month of July.
While the report showed a modest monthly increase by consumer prices that matched economist estimates, the annual rate of core consumer price growth accelerated by more than expected.
The Labor Department said its consumer price index rose by 0.2 percent in July after climbing by 0.3 percent in June. The modest increase matched expectations.
The annual rate of growth by consumer prices in July was unchanged from the previous month at 2.7 percent, while economists had expected the pace of growth to tick up to 2.8 percent.
The report also said the core consumer price index, which excludes food and energy prices, climbed by 0.3 percent in July after rising by 0.2 percent in June. The increase by core prices was also in line with estimates.
However, the annual rate of growth by core consumer prices accelerated to 3.1 percent in July from 2.9 percent in June. Economists had expected the pace of growth to inch up to 3.0 percent.
'July's faster core inflation was largely driven by hot increases of core services prices,' said Bill Adams, Chief Economist for Comerica Bank. 'The Fed believes services prices are a better metric of inflation's trend than goods prices, where they are expecting a temporary pickup in inflation from tariffs.'
He added, 'For the interest rate outlook, the CPI report is an argument against a cut in September, but the jobs data to be released early next month will likely have a larger sway over the Fed's next decision.'
Several economists suggested the data raises question about a September rate cut, CME Group's FedWatch Tool indicates the chances of a quarter point rate cut next month have risen to 94.4 percent following the report.
A lack of major U.S. economic data may keep some traders on the sidelines on Wednesday ahead of the release several key reports in the latter part of the week.
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