Treasuries Show Notable Move Back To The Upside

(RTTNews) - Treasuries showed a strong move back to the upside during trading on Thursday after moving modestly lower in the two previous sessions.

Bond prices moved steadily higher throughout much of the session before closing firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.7 basis points to 1.823 percent.

The higher close by treasuries came after the Treasury Department released the results of its auction of $28 billion worth of seven-year notes, which attracted slightly above average demand.

The seven-year note auction drew a high yield of 1.652 percent and a bid-to-cover ratio of 2.57, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.50.

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

Today's seven-year note auction came after the Treasury sold $26 billion worth of two-year notes on Tuesday and $34 billion worth of five-year notes on Wednesday.

Traders were also digesting the latest batch of U.S. economic data, which added to recent uncertainty about the outlook for interest rates.

The National Association of Realtors released a report this morning showing that pending home sales surged up to their highest level in a decade in April.

NAR said its pending home sales index surged up by 5.1 percent to 116.3 in April after climbing by 1.6 percent to an upwardly revised 110.7 in March. Economists had expected the index to increase by just 0.8 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

With the much bigger than expected increase, the pending home sales reached its highest level since hitting 117.4 in February of 2006.

The Labor Department also released a report showing a bigger than expected drop in initial jobless claims in the week ended May 21st.

The report said initial jobless claims fell to 268,000, a decrease of 10,000 from the previous week's unrevised level of 278,000. Economists had expected claims to edge down to 275,000.

A separate report from the Commerce Department showed a sharp jump in durable goods orders in April, although the data also pointed to continued weakness in business spending.

While the report said durable goods orders shot up by 3.4 percent in April, orders for non-defense capital goods excluding aircraft, a closely watched indicator of capital spending, fell by 0.8 percent.

"As far as the June Fed decision goes, this data has not taken the argument very far forward," said ING Chief International Economist Rob Carnell. "We remain slightly in favor of a July hike, but the outcome remains data dependent."

Reports on first quarter GDP and consumer sentiment may attract attention on Friday along with a speech by Federal Reserve Chair Janet Yellen.