WASHINGTON (dpa-AFX) - Following the notable advance seen in the previous session, treasuries moved back to the downside during trading on Thursday.
Bond prices showed a significant downward move in morning trading and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.5 basis points to 4.293 percent.
The pullback by treasuries came following the release of a Labor Department report showing producer prices in the U.S. increased by much more than expected in the month of July.
The Labor Department said its producer price index for final demand shot up by 0.9 percent in July after coming in unchanged in June. Economists had expected producer prices to rise by 0.2 percent.
The report also showed a substantial acceleration by the annual rate of producer price growth, which surged to 3.3 percent in July from an upwardly revised 2.4 percent in June.
Economists had expected the annual rate of producer price growth to increase to 2.5 percent from the 2.3 percent originally reported for the previous month.
The hotter-than-expected producer price inflation data partly offset optimism about a September interest rate cut generated by the consumer price inflation data released earlier this week.
However, CME Group's FedWatch Tool is currently still indicating a 92.8 percent chance the Federal Reserve will lower rates by a quarter point next month.
'The large spike in the Producer Price Index (PPI) this morning shows inflation is coursing through the economy, even if it hasn't been felt by consumers yet,' said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.
He added, 'Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a 'guaranteed' rate cut next month.'
Trading on Friday may be impacted by reaction to a slew of U.S. economic data, including reports on retail sales, industrial production and consumer sentiment.
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