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Treasuries Finish Higher

The dip in CPI, and a spike in oil prices, helped the bid into the close

Treasuries opened lower on more overseas profit taking, though the overnight flow was again light. The 0.1% dip in CPI, and a modest 0.1% uptick in the core CPI neutralized the surge in the housing data. But the bid faded quickly as the CPI data, at close inspection, gave no compelling reason for the Fed to withhold a rate hike in September. But soaring oil prices pointed to slower U.S. consumer spending down the line, helping to lift Treasuries into the close.

Hedge funds sold ahead of the data, but were buyers again on the dip. Speculators bought ahead of the data, but sold the pop, with retail flows next to nil. By midday, the bid was entrenched with some light option-related purchases. But these purchases gained size as a large servicer stepped in. Mortgage buyers in cash also surfaced, moving prices to the highs into the close. The benchmark 10-year note rose 15/32 in price, taking yields to 4.20%.

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