Treasuries Close Modestly Higher Following Dovish Fed Comments

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

After seeing initial strength, bond prices pulled back in morning trading before moving back to the upside in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.2 basis points to 1.878 percent.

The modestly higher close by treasuries was partly in reaction to comments by a pair of Federal Reserve officials generating optimism about the central bank delaying an interest rate hike.

In remarks in London, Boston Fed President Eric Rosengren noted that recent jobs data has been mixed and said inflation remains stubbornly below the Fed's target of 2 percent.

Rosengren subsequently said the central bank's two conditions for raising short-term interest rates have not yet been met.

Atlanta Fed President Dennis Lockhart also sounded a dovish tone in a speech on the economic outlook and monetary policy in Florida.

Lockhart said an interest rate hike at the Fed's June meeting is not off the table but noted that it is currently not his preference.

The dovish remarks seemed to overshadow comments by Cleveland Fed President Loretta Mester, who said she would be comfortable raising rates relatively soon if the softness in the first quarter is indeed transitory.

Earlier in the day, traders were presented with another mixed batch of economic data, which contributed to some choppy trading.

Treasuries initially benefited from the release of a Commerce Department report showing a much smaller than expected rebound in housing starts.

While the report said housing starts rose 2.0 percent to an annual rate of 926,000 in March, economists had been expecting starts to jump to a rate of 1.04 million.

The Commerce Department also said building permits, an indicator of future housing demand, fell 5.7 percent to an annual rate of 1.039 million in March.

However, treasuries pulled back following the release of a separate report from the Philadelphia Federal Reserve showing that its index of regional manufacturing activity rose more than expected in April.

The Philly Fed said its diffusion index of current activity rose to 7.5 in April from 5.0 in March, with a positive reading indicating growth. Economists had expected the index to inch up to 6.0.

Another batch of economic data is scheduled to be released on Friday, including reports on consumer price inflation, consumer sentiment, and leading economic indicators.