FX.co ★ Treasuries Extend Modest Rebound Seen Last Friday

Following the modest rebound observed last Friday, Treasury securities continued to demonstrate strength on Tuesday as trading resumed after the Columbus Day holiday on Monday.

Bond prices advanced early in the session and saw additional gains as the day progressed. Consequently, the yield on the benchmark ten-year note, which moves inversely to its price, declined by 6.0 basis points to 4.038 percent.

The ten-year yield continued to recede after closing last Thursday at its highest level in over two months.

Treasuries remained supported by positive sentiment regarding the interest rate outlook, spurred by last Friday's report on producer price inflation.

The Labor Department's report revealed that producer prices remained unexpectedly unchanged in September, while the annual rate of price growth slowed slightly.

Despite diminished expectations of the Federal Reserve reducing rates by another 50 basis points next month, the data bolstered optimism that the central bank will lower rates by 25 basis points.

According to CME Group's FedWatch Tool, there is currently a 92.2 percent likelihood that the Fed will cut rates by a quarter of a point at its November meeting.

Treasuries may have additionally benefited from their status as a safe haven amidst escalating tensions in the Middle East and reports of extensive military drills by China around Taiwan.

Attention is likely to shift to the report on import and export prices set for release on Wednesday, although trading activity may be somewhat subdued in anticipation of a series of more closely watched economic data on Thursday.