U.S. govt bonds rally higher after in-line CPI data

NEW YORK (AFX) - U.S. government bonds rallied higher after consumer price data came in in line with Wall Street expectations and assuaged fears of inflation, dealers said. 

	    At 8.45 am, the 30-year 5-3/8 pct bond was up 19/32 at 93-4/32 yielding 5.861, the 10-year 5 pct note was up 9/32 at 96-16/32 yielding 5.463 pct, and the 4 pct 2-year higher 2/32 at 99-19/32 yielding 4.201 pct.

	    The June bond future was up 17/32 at 99-19/32.

	    Earlier, the Labor Department announced that consumer prices rose 0.3 pct in April and were up 3.3 pct year-on-year. The core rate, which excludes volatile food and energy prices, increased 0.2 pct, and was up 2.6 pct 

year-on-year. 

	    The increase in the overall CPI was lower than expected. The core rate was in line with the expectations of Wall Street economists, who expected the 

overall CPI to rise 0.4 pct and for the core rate to rise 0.2 pct.

	    Dealers said investors welcomed the benign data as there have been concerns in the market that the Fed's aggressive rate cuts might "sow the seeds for inflation later this year".

	    Painewebber senior fixed income strategist Michael Ryan said the data was "fairly benign and therefore reassuring to the market", sparking a rally in  long-term Treasuries.

	    The Fed funds rate was at 4-1/8.

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