Bond Prices Hold Steady Amid Inflation Fears

U.S. Treasury debt prices were unchanged to narrowly firmer on Wednesday after slipping briefly on news that import prices had risen more than expected in July, raising inflation concerns.

Prices for U.S. imports rose 1.7 percent and were 21.6 percent higher than a year ago in the biggest 12-month gain in 26 years, according to a government report, feeding already elevated fears about soaring price pressures.

"The credit markets get a little nervous when they believe that food and energy price inflation might spread," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.

But the effect was fleeting, and analysts said Treasurys would take their cue from the stock market, which was sharply lower on rising inflation pressures and lower-than-expected sales and profits from Deere, the world's largest maker of farm machinery.

"We will see how the stocks follow through today," said Andrew Brenner, senior vice president at MF Global in New York.

Meanwhile, data on U.S. retail sales, often a market mover, had no discernible impact on bond prices because it was in line with Wall Street forecasts. The report showed that total sales at U.S. retailers slipped slightly in July, hurt by a big drop in auto sales.

The U.S. benchmark 10-year Treasury note was up 1/32, its yield easing to 3.895 percent from 3.90 percent on Tuesday.

Two-year Treasury note prices were unchanged, the yield at 2.43 percent.

Five-year notes were also flat, yielding 3.14 percent.

Thirty-year Treasury bonds were up 3/32, their yields easing to 4.53 percent from 4.54 percent Tuesday.

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