Treasury Prices Rise After Consumer Price Index News

MARKETSCOPE : Treasury bond values gained Wednesday after news about rising consumer prices.

The 10-year Treasury notes climbed 10/32 on the day to 99-26/32 for yield of 4.53%, while the 30-year Treasury bond rose 26/32 to 100-10/32 for yield of 4.85%.

A $22 billion auction in 2-year notes drew solid demand, according to Action Economics. The 2-year note climbed 2/32 to 99-15/32 for a yield of 4.676%.

The U.S. Consumer Price Index rose a more than expected 0.7% in January, after falling 0.1% in December. The core rate rose 0.2%, which was about in line with expectations, after rising 0.1% in December. Energy prices surged 5.0% to pace the strength in the overall data.

Although the core CPI "inflation remained contained in January, overall consumer inflation is still elevated and we remain concerned about the potential for pass through of high energy prices into core inflation," says John Ryding, an analyst at Bear Stearns.

They weren't the only ones who were still worried. "Inflation pressures are still here and the CPI data will keep the Fed on the offensive," says Drew Matus, an analyst at Lehman Brothers.

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