U.S. government bonds bounced around the flatline Tuesday, recovering after an early selloff.
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The yield on the 10-year benchmark Treasury note fell to 2.305%, according to Tradeweb, from 2.309% Monday. Yields fall as bond prices rise.
The 10-year yield had climbed as high as 2.327% after data showed that U.S. import prices ticked up 0.7% in September from a month earlier, the biggest month-over-month increase since June 2016, the Labor Department said. Economists surveyed by The Wall Street Journal expected a 0.6% increase in import prices.
The Federal Reserve looks at the import-price index to gauge how quickly overall prices for products are rising. Treasury prices tend to fall on strong inflation data because inflation is a threat to long-term government bonds, chipping away at the purchasing power of their fixed payments.
Today's data is "confirmation that the economy is doing well, and we're seeing some increase in price pressures," said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management.
Fresh data from the Fed gave investors another signal that the economy is chugging along, despite any hurricane-related disruptions in recent weeks. A measure of output at factories, mines and utilities known as industrial production rose 0.3% in September from the prior month, the Fed said Tuesday, in line with what economists surveyed by The Wall Street Journal had expected. Confidence among home builders rebounded in October, according to data from the National Association of Home Builders.
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Tuesday's reports come after a softer-than-expected inflation figure on Friday that sparked a rally in government bonds.
Investors were also looking for signs about who might lead the Federal Reserve next. President Donald Trump plans to meet Thursday with Federal Reserve Chairwoman Janet Yellen, whose term expires in February. Other candidates such as Stanford University economist John Taylor are viewed as potentially being more aggressive regarding raising interest rates than the current chairwoman is, investors said.
Yields on two-year Treasury notes, which tend to be more sensitive to expectations for Federal Reserve policy, traded at 1.546% early Tuesday, according to Tradeweb, after hitting the highest level since October 2008 on Monday.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
October 17, 2017 12:20 ET (16:20 GMT)