Treasury Yields Spike Following Upbeat Economic Data
Treasuries saw significant weakness during trading on Thursday, extending the notable move to the downside seen over the past several sessions.
Bond prices came under pressure in early trading and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 12.9 basis points to 1.518 percent.
The ten-year yield briefly spiked above 1.6 percent in intraday trading, reaching its highest level in a year. The yield still ended the session at a one-year closing high.
The sell-off by treasuries came as a batch of largely upbeat U.S. economic data further reduced the appeal of safe havens such as bonds.
Early in the day, the Labor Department released a report showing a steep drop in first-time claims for U.S. unemployment benefits in the week ended February 20th.
The Labor Department said initial jobless claims tumbled to 730,000, a decrease of 111,000 from the previous week’s revised level of 841,000.
Economists had expected jobless claims to drop to 838,000 from the 861,000 originally reported for the previous week.
With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting 716,000 in the week ended November 28th.
The Commerce Department also released a report showing new orders for U.S. manufactured durable goods spiked by much more than expected in the month of January.
The report said durable goods orders soared by 3.4 percent in January after jumping by an upwardly revised 1.2 percent in December.
Economists had expected durable goods orders to surge up by 1.1 percent compared to the 0.5 percent increase that had been reported for the previous month.
Excluding a sharp increase in orders for transportation equipment, durable goods orders still jumped by 1.4 percent in January after spiking by an upwardly revised 1.7 percent in December.
Ex-transportation orders had been expected to climb by 0.7 percent, matching the increase that had been reported for the previous month.
A separate report released by the Commerce Department showed U.S. gross domestic product jumped by slightly more than originally estimated in the fourth quarter of 2020.
The Commerce Department said GDP surged up by 4.1 percent in the fourth quarter compared to the previously reported 4.0 percent spike. The upward revision matched economist estimates.
The intraday spike by yields came just as the Treasury Department revealed this month’s auction of $62 billion worth of seven-year notes attracted well below average demand.
The seven-year note auction drew a high yield of 1.195 percent and a bid-to-cover ratio of 2.04, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.42.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Earlier this week, the Treasury revealed its auctions of $60 billion worth of two-year notes and $61 billion worth of five-year notes also attracted below average demand.
Another batch of economic data may impact trading on Friday, with traders likely to keep an eye on reports on personal income and spending, consumer sentiment, and Chicago-area business activity.
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