U.S. government debt yields whipsawed after the government's announcement on consumer prices initially sent rates tumbling Thursday morning.
The Labor Department said that consumer prices rose less than anticipated in August as declines in healthcare and clothing costs offset increases in the price of gasoline and rents. Its Consumer Price Index rose 0.2 percent last month, missing expectations of a 0.3 percent gain.
The so-called core CPI, which excludes volatile food and energy components, inched higher by 0.1 percent.
The yield on the benchmark 10-year Treasury note was lower at 2.957 percent at 1:39 p.m. ET, while the yield on the 30-year Treasury bond was lower at 3.092 percent. Bond yields move inversely to prices.
There's "clearly no sign of higher wages translating to demand-side inflation and nothing to suggest the Fed will have any urgency to accelerate the gradual pace of tightening," Ian Lyngen, head of U.S. rate strategy at BMO Capital Markets, said in an emailed statement.
"That said, this won't take a Sept hike off the table," he added.