Treasuries Show Notable Move Back To The Upside
After moving notably lower over the past few sessions, treasuries regained some ground during the trading day on Thursday.
Bond prices moved steadily higher as the day progressed, closing firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 8.7 basis points to 0.885 percent.
The decrease on the day came after the ten-year yield ended Tuesday’s trading at its highest closing level since mid-March.
The rebound by treasuries came as the recent surge in coronavirus cases across the U.S. and Europe has led to renewed concerns about the economic outlook, increasing the appeal of safe havens like bonds.
According to data from John Hopkins University, the U.S. reported a record 144,133 new coronavirus cases on Wednesday.
The seven-day average of new cases has skyrocketed to more than 127,400, reflecting a 35 percent spike compared with a week ago.
The jump in new cases has been accompanied by notable increases in hospitalizations and deaths, suggesting the surge is not only due to increased testing.
The latest wave of coronavirus cases has led to concerns about the economic impact of new restrictions and lockdowns.
During a European Central Bank Forum on Central Banking virtual event, Federal Reserve Chair Jerome Powell noted the economic outlook remains uncertain despite recent upbeat news about a potential coronavirus vaccine.
“From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” Powell said. “With the virus spreading, the next few months could be challenging.”
The virus concerns overshadowed a report from the Labor Department showing a bigger than expected decrease in first-time claims for unemployment benefits in the week ended November 7th.
The Labor Department said initial jobless claims fell to 709,000, a decrease of 48,000 from the previous week’s revised level of 757,000.
Economists had expected jobless claims to dip to 735,000 from the 751,000 originally reported for the previous week.
With the bigger than expected decrease, jobless claims fell to their lowest level since before lockdowns were imposed in mid-March.
A separate report released by the Labor Department showed consumer prices came in flat in the month of October.
The Labor Department said its consumer price index was unchanged in October after rising by 0.2 percent in September. Economists had expected another 0.2 percent uptick.
Excluding food and energy prices, consumer prices were still flat in October after edging up by 0.2 percent in September. Core prices were also expected to inch up by another 0.2 percent.
Meanwhile, the Treasury Department revealed that its sale of $27 billion worth of thirty-year bonds attracted slightly below average demand.
The thirty-year bond auction drew a high yield of 1.680 percent and a bid-to-cover ratio of 2.29, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.35.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
News on the coronavirus front may remain in focus on Friday, although traders are also likely to keep an eye on reports on producer price inflation in October and consumer sentiment in November.
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