MW: Treasurys erase losses after data, before Bernanke
NEW YORK (MarketWatch) -- Treasury prices erased an earlier decline on Wednesday after a report showed consumer prices rose 0.1%, easing concerns that inflation will force the Federal Reserve to raise interest rates soon.
The tame data precede testimony that Fed Chairman Ben Bernanke will give today to Congress, scheduled to begin at 10 a.m. Eastern time.
Yields on 10-year notes (UST10Y 3.82, 0.00, -0.05%) , which move inversely to prices, fell 2 basis points to 3.81%, after being 2 basis points higher before the data. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 1.04, +0.00, +0.38%) , more sensitive to rate expectations, were little changed at 1.05%.
The core consumer-price index -- which excludes food and energy prices -- was unchanged in March, while analysts had expected a 0.1% gain, the Labor Department said. The core rate is up 1.1% in the past year, the smallest gain since early 2004. The last time the year-over-year core increase was smaller was in January 1966.
"That's a cycle low and weakest since similar gains of the last cycle's lows in late 2003," said strategists at CRT Capital Group.
Late Tuesday, Richmond Fed President Jeffrey Lacker said the U.S. economy is still early in its recovery from one of the deepest recessions on record, according to remarks prepared for a speech Tuesday. Read about Fed's Lacker.
Lacker also said that "inflation remains benign," while adding that "the risk of a pronounced decline in inflation has diminished substantially in my view."
The minutes from the Federal Open Market Committee meeting in March, released last week, attempted to explain that keeping interest rates low for an "extended period" cannot be translated into six months or any other amount of time. Officials indicated the expectation is contingent on the evolution of the economy. See previous story on Fed minutes.
"I do not expect any major shift away from their recent statements and the outlook expressed in the March 16th FOMC Minutes," said strategists at RBS Securities.
Limiting gains, a separate report showed retail sales rose 1.6% last month, more than some economists expected. Read about retail sales.
Still to come is the Fed's compilation of anecdotes about the economy, to be used to help form monetary policy at officials' next meeting on April 27-28. The Beige Book will be released at 2 p.m. Eastern time.
