Treasuries Finish Lackluster Session Slightly Higher
After failing to sustain an early move to the upside, treasuries showed a lack of direction over the course of the trading day on Wednesday.
Bond prices spent much of the day lingering near the unchanged line before closing slightly higher. As a result, the yield on the benchmark ten-year note, which moves opposite its price, edged down by 1.1 basis points to 2.749 percent.
With the modest decrease on the day, the ten-year yield ended the session at its lowest closing level in over a month.
The lackluster performance seen for most of the came as traders seemed to be reluctant to make significant moves ahead of the release of the minutes of the latest Federal Reserve meeting.
However, treasuries continued experience choppy trading even after the release of the minutes, which indicated the Fed intends to move “expeditiously” to a more neutral monetary policy stance.
The minutes revealed the Fed plans to use both interest rate increases and reductions in the size of its balance sheet to achieve a neutral posture.
At the meeting, the Fed decided to raise the target range for the federal funds rate by 50 basis points to 0.75 to 1.0 percent, marking the biggest rate hike since May 2000.
The central bank also decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1.
The minutes of the meeting showed most participants agreed additional 50 basis point increases would likely be appropriate at the “next couple of meetings.”
“Many participants judged that expediting the removal of policy accommodation would leave the Committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments,” the Fed said.
The shift toward a more neutral monetary policy stance comes as the Fed seeks to return inflation to its 2 percent goal while sustaining strong labor market conditions.
However, the minutes showed participants agreed a restrictive stance of policy may become appropriate depending on the evolving economic outlook and the risks to the outlook.
The Fed noted risks to the outlook for economic growth were skewed to the downside, while risks to the outlook for inflation were skewed to the upside.
On the U.S. economic front, a report released by the Commerce Department showed new orders for durable goods increased by less than expected in the month of April.
The Commerce Department said durable goods orders rose by 0.4 percent in April after climbing by a downwardly revised 0.6 percent in March.
Economists had expected durable goods orders to advance by 0.6 percent compared to the 1.1 percent jump that had been reported for the previous month.
Excluding orders for transportation equipment, durable goods orders edged up by 0.3 percent in April after surging by 1.1 percent in March. Ex-transportation orders were also expected to increase by 0.6 percent.
Reports on initial jobless claims and pending home sales may attract attention on Thursday along with a revised reading on first quarter GDP.
Bond traders are also likely to keep an eye on the results of the Treasury Department’s auction of $42 billion worth of seven-year notes.
Source: Read Full Article