Bonds News

TREASURIES-Bond prices edge up ahead of inflation data

NEW YORK, June 29 (Reuters) - U.S. Treasury debt prices rose on Friday as investors bet on a tame reading of the Federal Reserve’s preferred inflation gauge after the central bank acknowledged a moderation in underlying price pressures.

Government bonds were also lifted by month-end and quarter-end buying, as well as a modest flight-to-quality bid from news that British police had defused a bomb left in an abandoned car in London’s theater district.

“People yesterday were a bit concerned about the PCE deflator that is coming out this morning,” said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.

“Now they are realizing the Fed probably wouldn’t have moderated their statement if they thought the PCE was going to come in somewhat ... massively different from what they anticipated. Although it might not come out on target, probably it will come in pretty close.”

A Reuters survey forecast the core PCE price index rising 0.1 percent in May, unchanged from April. The report is due at 0830 a.m. (1230 GMT).

The Federal Open Market Committee left the main overnight lending rate steady at 5.25 percent as expected on Thursday and acknowledged in its statement that underlying inflation has eased recently.

But the FOMC said inflation remained the Fed’s main concern.

The benchmark 10-year Treasury note US10YT=RR traded up 4/32 in price for a yield on of 5.09 percent, versus 5.11 percent late on Thursday. The 30-year bond US30YT=RR was up 10/32 in price to yield 5.18 percent, compared to 5.21 percent late on Thursday.

Data due in the session includes the Chicago PMI, expected to show a drop from May, and the final reading of the Reuters/University of Michigan consumer sentiment survey for June.