Treasuries Move Back To The Downside On Yellen Comments, Data

(RTTNews) - After turning higher over the course of the previous session, treasuries moved back to the downside during trading on Thursday.

Bond prices drifted lower as the day progressed before ending the day firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.3 basis points to 2.276 percent.

With the increase on the day, the ten-year yield more than offset the drop seen on Wednesday to reach its highest closing level in well over ten months.

The pullback by treasuries was partly due to comments from Federal Reserve Chair Janet Yellen signaling a near-term increase in interest rates.

In testimony before Congress's Joint Economic Committee, Yellen said the Fed has determined that a rate hike could become appropriate "relatively soon" if incoming data provides further evidence of continued progress toward the central bank's objectives.

Yellen noted that the Fed must remain forward looking in setting monetary policy and cautioned that waiting too long to raise rates could require abrupt policy tightening to keep the economy from significantly overshooting the longer-run goals.

"Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability," Yellen said.

However, Yellen reiterated that the Fed expects the evolution of the economy will warrant only gradual increases in rates over time.

Traders were also reacting to a batch of largely upbeat U.S. economic data, including a report from the Commerce Department showing that housing starts jumped to a nine-year high in October.

The Commerce Department said housing starts surged up by 25.5 percent to an annual rate of 1.323 million in October after tumbling by 9.5 percent to a revised 1.054 million in September.

Economists had expected housing starts to jump by 11.6 percent to a rate of 1.168 million from the 1.047 million originally reported for the previous month.

With the much bigger than expected increase, housing starts rose to their highest level since reaching a rate of 1.330 million in August of 2007.

The report also said building permits, an indicator of future housing demand, edged up by 0.3 percent to a rate of 1.229 million in October from 1.225 million in September. Building permits had been expected to drop by 2.9 percent to a rate of 1.190 million.

The Labor Department also released a report showing that initial jobless claims fell to their lowest level in over forty years in the week ended November 12th.

The report said initial jobless claims fell to 235,000, a decrease of 19,000 from the previous week's unrevised level of 254,000. Economists had expected jobless claims to inch up to 257,000.

The unexpected decline pulled jobless claims down to their lowest level since hitting 233,000 in November of 1973.

A separate Labor Department report said consumer prices increased in line with economist estimates in the month of October.

Following the slew of U.S. economic data released this morning, the economic calendar for Friday is relatively quiet, although traders are likely to keep an eye on remarks by several Fed officials.