Treasuries Close Modestly Lower After Seeing Initial Strength

Treasuries moved modestly lower over the course of the trading session on Thursday after failing to sustain an initial move to the upside.

Bond prices pulled back off their early highs and showed a lack of direction for most of the day before closing lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.1 basis points to 2.789 percent.

Profit taking may have contributed to the pullback by treasuries, as the uptick by the ten-year yield came after it hit an eight-month intraday low of 2.749 percent in early trading.

Traders also continued to digest Wednesday’s rate hike by the Federal Reserve as well as the less dovish than hoped accompanying statement.

Raising concerns among some investors, the Fed indicated it plans to continue to raising interest rates despite signs of slowing economic growth.

Disappointing economic data has added to concerns about the Fed’s plans, with a Labor Department report showing initial jobless claims rebounded in the week ended December 15th.

The report said initial jobless claims rose to 214,000, an increase of 8,000 from the previous week’s unrevised level of 206,000. Economists had expected jobless claims to climb to 216,000.

A separate report from the Philadelphia Federal Reserve said manufacturing activity in the Philadelphia region continued to grow but remained subdued in the month of December.

The report said the diffusion index for current general activity dropped to 9.4 in December after tumbling to 12.9 in November.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to rise to 15.0.

Meanwhile, the Conference Board released a report shortly after the start of trading showing an unexpected increase in leading U.S. economic indicators in the month of November.

The Conference Board said its leading economic index rose by 0.2 percent in November after falling by a revised 0.3 percent in October.

Economists had expected the index to come in unchanged compared to the 0.1 percent uptick originally reported for the previous month.

“The LEI increased slightly in November, but its overall pace of improvement has slowed in the last two months,” said Ataman Ozyildirim, Director of Economic Research at the Conference Board.

He added, “Solid GDP growth at about 2.8 percent should continue in early 2019, but the LEI suggests the economy is likely to moderate further in the second half of 2019.”

Trading on Friday may be impacted by key economic data, including a final reading on third quarter GDP as well as reports on durable goods orders, personal income and spending, and consumer sentiment.

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