Ten-Year Yield Slumps To Two-Month Closing Low

(RTTNews) - Following the pullback seen in the previous session, treasuries showed a significant move back to the upside during trading on Thursday.

Bond prices moved modestly higher in early trading and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slumped 6.8 basis points to 4.104 percent.

The ten-year yield more than offset the 2.5 basis point increase seen on Wednesday, tumbling to its lowest closing level in over two months.

Treasuries initially benefitted from the release of a report from the Labor Department showing first-time claims for U.S. unemployment benefits dipped by less than expected last week.

The report said initial jobless claims slipped to 227,000, a decrease of 5,000 from the previous week's revised level of 232,000.

Economists had expected jobless claims to fall to 220,000 from the 231,000 originally reported for the previous week.

With jobless claims remaining at a somewhat elevated level, the data partly offset yesterday's stronger-than-expected monthly jobs data.

Treasuries saw further upside after the National Association of Realtors released a separate report showing existing home sales pulled back by much more than expected in the month of January.

NAR said existing home sales plunged by 8.4 percent to an annual rate of 3.91 million in January after surging by 4.4 percent to a downwardly revised rate of 4.27 million in December.

Economists had expected existing home sales to tumble by 3.5 percent to an annual rate of 4.20 million from the 4.35 million originally reported for the previous month.

Buying interest was also generated in reaction to news that the Treasury Department's auction of $25 billion worth of thirty-year bonds attracted well above average demand.

The thirty-year bond auction drew a high yield of 4.750 percent and a bid-to-cover ratio of 2.66, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.37.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The focus now shifts to the Labor Department's report on consumer price inflation that is due to be released on Friday.

"Forecasts suggest the critical core CPI measure could ease to around 2.5%, marking a near five-year low," said Daniela Hathorn, Senior Market Analyst at Capital.com. "If inflation comes in line with — or ideally below — expectations, the strength of the labor market may become secondary."

She added, "A softer inflation print would keep rate cuts firmly priced in and could restore upward momentum in risk assets."