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Treasuries Gain as Producer Prices, Industrial Production Drop
By Elizabeth Stanton and Deborah Finestone
Oct. 17 (Bloomberg) -- Treasuries gained after reports showed overall producer prices fell last month by the most since April 2003, while industrial dropped by the most in a year.
Treasuries also got a boost after a government report showed international investment in U.S. securities was a record $116.8 billion in August. Traders looked past a surge in producer prices excluding food and fuel because it resulted from a jump in the cost of new vehicles, which may be temporary.
``The inflation numbers are not an impediment in traders' minds, because the drop in headline is so overwhelming,'' said Richard Gilhooly, an interest-rate strategist at BNP Paribas Securities Corp. in New York. ``An uptick in core inflation, especially when it's led by autos, is not credible.''
The 10-year note's yield, which moves inversely to its price, fell almost 3 basis points, or 0.03 percentage point, to 4.73 percent at 9:18 a.m. in New York, according to broker Cantor Fitzgerald LP. The yield fell to a seven-month low of 4.53 percent on Sept. 25 on speculation the Federal Reserve would cut rates early next year.
The price of the 4 7/8 percent note due in August 2016 rose 12/32, or $3.75 per $1,000 face amount, to 101 3/32.
Treasuries also rose after a Fed report showed industrial production dropped 0.6 percent last month, the most since a year earlier, after being flat in August.
Producer Price Drop
The overall producer price index dropped 1.3 percent last month after a 0.1 percent gain in August, the government data showed. The median forecast in a Bloomberg survey was for a 0.7 percent drop. Prices excluding food and fuel rose 0.6 percent after falling 0.4 percent the prior month. Economists expected a 0.2 percent jump. Core prices rose 1.2 percent in the year through September, after a 0.9 percent increase in August.
Net purchases of Treasuries totaled $46.3 billion in August, up from $6.6 billion in July, the Treasury data showed.
U.S. 10-year note yields jumped last week by the most since June after policy makers including Federal Reserve Bank of Chicago President Michael Moskow said inflation remains a concern. The Fed lifted borrowing costs 17 straight times starting in June 2004, before pausing the past two months.
Interest-rate futures show traders have mostly exited bets the Fed will cut its target for the overnight lending rate between banks early next year. The target is now 5.25 percent.
Interest-rate futures show traders see a 2 percent chance of a quarter-percentage point cut to 5 percent before February. Futures showed a 46 percent chance of a rate cut by February on Sept. 25.
To contact the reporter on this story: Elizabeth Stanton in New York at [email protected] ; Deborah Finestone in New York at [email protected] .
By Elizabeth Stanton and Deborah Finestone
Oct. 17 (Bloomberg) -- Treasuries gained after reports showed overall producer prices fell last month by the most since April 2003, while industrial dropped by the most in a year.
Treasuries also got a boost after a government report showed international investment in U.S. securities was a record $116.8 billion in August. Traders looked past a surge in producer prices excluding food and fuel because it resulted from a jump in the cost of new vehicles, which may be temporary.
``The inflation numbers are not an impediment in traders' minds, because the drop in headline is so overwhelming,'' said Richard Gilhooly, an interest-rate strategist at BNP Paribas Securities Corp. in New York. ``An uptick in core inflation, especially when it's led by autos, is not credible.''
The 10-year note's yield, which moves inversely to its price, fell almost 3 basis points, or 0.03 percentage point, to 4.73 percent at 9:18 a.m. in New York, according to broker Cantor Fitzgerald LP. The yield fell to a seven-month low of 4.53 percent on Sept. 25 on speculation the Federal Reserve would cut rates early next year.
The price of the 4 7/8 percent note due in August 2016 rose 12/32, or $3.75 per $1,000 face amount, to 101 3/32.
Treasuries also rose after a Fed report showed industrial production dropped 0.6 percent last month, the most since a year earlier, after being flat in August.
Producer Price Drop
The overall producer price index dropped 1.3 percent last month after a 0.1 percent gain in August, the government data showed. The median forecast in a Bloomberg survey was for a 0.7 percent drop. Prices excluding food and fuel rose 0.6 percent after falling 0.4 percent the prior month. Economists expected a 0.2 percent jump. Core prices rose 1.2 percent in the year through September, after a 0.9 percent increase in August.
Net purchases of Treasuries totaled $46.3 billion in August, up from $6.6 billion in July, the Treasury data showed.
U.S. 10-year note yields jumped last week by the most since June after policy makers including Federal Reserve Bank of Chicago President Michael Moskow said inflation remains a concern. The Fed lifted borrowing costs 17 straight times starting in June 2004, before pausing the past two months.
Interest-rate futures show traders have mostly exited bets the Fed will cut its target for the overnight lending rate between banks early next year. The target is now 5.25 percent.
Interest-rate futures show traders see a 2 percent chance of a quarter-percentage point cut to 5 percent before February. Futures showed a 46 percent chance of a rate cut by February on Sept. 25.
To contact the reporter on this story: Elizabeth Stanton in New York at [email protected] ; Deborah Finestone in New York at [email protected] .
