Treasuries Close Moderately Higher After Seven-Year Note Auction

(RTTNews) - Treasuries fluctuated over the course of the trading day on Thursday before eventually ending the session moderately lower.

Bond prices moved to the downside in afternoon trading after showing a lack of direction earlier in the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.8 basis points to 1.577 percent.

The lower close by treasuries came as the Treasury Department's auction of $28 billion worth of seven-year notes attracted below average demand.

The seven-year note auction drew a high yield of 1.423 percent and a bid-to-cover ratio of 2.38, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.51.

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

Trading activity was relatively subdued, however, as traders continued to look ahead to a speech by Federal Reserve Chair Janet Yellen on Friday.

Yellen is due to speak at the Kansas City Fed's monetary policy symposium in Jackson Hole, Wyoming, and traders will be looking for clues about the outlook for interest rates in her remarks.

However, analysts have noted the speech entitled "Designing Resilient Monetary Policy Frameworks for the Future" may focus more on the long-term.

"Traders are, as always, hoping to be able to decipher the path for U.S. monetary policy," said Accendo Markets analysts Mike van Dulken and Augustin Eden. "They may be left wanting. Again."

On the U.S. economic front, the Commerce Department released a report before the start of trading showing a stronger than expected rebound in durable goods orders in the month of July.

The Commerce Department said durable goods orders surged up by 4.4 percent in July after tumbling by a revised 4.2 percent in June.

Economists had expected orders to climb by about 3.7 percent compared to the 4.0 percent slump that had been reported for the previous month.

Excluding a jump in orders for transportation equipment, durable goods orders rose by 1.5 percent in July after edging down by 0.3 percent in June. Ex-transportation orders had been expected to tick up by 0.5 percent.

A separate report from the Labor Department unexpectedly showed another modest drop in initial jobless claims in the week ended August 20th.

The report said initial jobless claims edged down to 261,000, a decrease of 1,000 from the previous week's unrevised level of 262,000. Economists had expected claims to rise to 265,000.

Trading on Friday is likely to be driven by reaction to Yellen's speech, which is liable to overshadow U.S. reports on second quarter GDP and consumer sentiment.