Treasuries Move Notably Lower Amid Interest Rate Concerns
Treasuries managed to recover from early weakness and end Wednesday’s trading roughly flat but moved back to the downside during trading on Thursday.
Bond prices came under pressure in morning trading and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 7.6 basis points to 3.799 percent.
The weakness among treasuries came as traders continued to express concerns about the outlook for interest rates amid Federal Reserve Chair Jerome Powell’s second day of testimony on Capitol Hill.
In an appearance before the Senate Banking Committee, Powell reiterated the Fed will continue to raise rates in an effort to reduce inflation.
Adding to the interest rate concerns, the Bank of England raised the interest rate more aggressively, citing persistent inflation and labor market tightness.
The rate-setting panel voted 7-2 to increase the bank rate by 50 basis points to 5.00 percent, the highest since 2008. Markets were expecting a quarter point increase.
Meanwhile, bond traders largely shrugged off a report from the Labor Department showing initial jobless claims held at their highest level since October 2021 last week.
The report said initial jobless claims came in at 264,000, unchanged from the previous week’s revised level. Economists had expected jobless claims to edge down to 260,000 from the 262,000 originally reported for the previous week.
Reflecting the upward revision to the previous week, jobless claims held at their highest level since hitting 269,000 in the week ended October 23, 2021.
Meanwhile, a separate report released by the National Association of Realtors unexpectedly showed a modest increase in U.S. existing home sales in the month of May.
NAR said existing home sales crept up by 0.2 percent to an annual rate of 4.30 million in May after tumbling by 3.2 percent to a revised rate of 4.29 million in April.
The uptick surprised economist, who had expected existing home sales to decrease by 0.6 percent compared to the 3.4 percent plunge originally reported for the previous month.
Looking ahead, trading on Friday may be somewhat subdued amid a lack of major U.S. economic data on the day.
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