Treasuries Move Sharply Higher After Seeing Initial Weakness

After recovering from an initial move to the downside, treasuries moved sharply higher over the course of the trading session on Thursday.

Bond prices climbed well off their early lows and firmly into positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 12.6 basis points to 2.910 percent after reaching a high of 3.081 percent.

The significant advance by treasuries came after the European Central Bank announced its decision to raise interest rates by 50 basis points, marking the first rate hike in over a decade.

“The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting,” the ECB said.

Treasuries also benefited from their appeal as a safe haven following some disappointing U.S. economic data, including a Labor Department showing initial jobless claims unexpectedly rose to an eight-month high in the week ended July 16th.

The report showed initial jobless claims crept up to 251,000, an increase of 7,000 from the previous week’s unrevised level of 244,000. The uptick surprised economists, who had expected jobless claims to edge down to 240,000.

Jobless claims inched higher for the third straight week, reaching their highest level since hitting 265,000 in the week ended November 13, 2021.

A separate report released by the Federal Reserve Bank of Philadelphia showed regional manufacturing activity unexpectedly contracted at a faster rate in the month of July.

The Philly Fed said its current general activity index slumped to a negative 12.3 in July from a negative 3.3 in June, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to rebound to a positive 0.4.

The Conference Board also released a report showing its index of leading economic indicators decreased for the fourth straight month in June.

The Conference Board said its leading economic index slumped by 0.8 percent in June after falling by a revised 0.6 percent in May.

Economists had expected the leading economic index to decline by 0.5 percent compared to the 0.4 percent drop originally reported for the previous month.

The surge by treasuries also came following news that President Joe Biden has tested positive for Covid-19.

A statement from White House Press Secretary Karine Jean-Pierre said Biden is fully vaccinated and twice boosted and experiencing very mild symptoms.

Looking ahead, a lack of major U.S. economic data may keep some traders on the sidelines on Friday as they look ahead to the Federal Reserve’s monetary policy decision next week.

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