Categories
Markets

Treasuries Move Notably Lower Following Upbeat Economic Data

After ending the previous session nearly unchanged, treasuries showed a notable move to the downside during trading on Thursday.

Bond prices moved steadily lower for much of the session before closing firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.4 basis points to 0.835 percent.

The weakness among treasuries came following the release of a report from the Commerce Department showing a stronger than expected rebound by the U.S. economy in the third quarter.

The Commerce Department said real gross domestic product skyrocketed by 33.1 percent in the third quarter after plunging by 31.4 percent in the second quarter. Economists had expected GDP to soar by 31.0 percent.

The substantial rebound in GDP came as consumer spending bounced back sharply, spiking by 40.7 percent in the third quarter after plummeting by 33.2 percent in the second quarter.

“Overall, the initial recovery in GDP after the first wave of lockdowns were lifted was stronger than we originally anticipated,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, “But, with coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower.”

Further reducing the appeal of safe havens like treasuries, the Labor Department released a report showing initial jobless claims fell to their lowest level since before the coronavirus-induced lockdowns in the week ended October 24th.

The report said initial jobless claims dropped to 751,000, a decrease of 40,000 from the previous week’s revised level of 791,000.

Economists had expected jobless claims to dip to 775,000 from the 787,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since hitting 282,000 in the week ended March 14th.

Meanwhile, the National Association of Realtors released a report showing pending home sales unexpectedly pulled back off a record high in the month of September.

NAR said its pending home sales index slumped by 2.2 percent to 130.0 in September after spiking by 8.8 percent to 132.9 in August. The drop came as a surprise to economists, who had expected pending home sales to jump by another 3.4 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Treasuries saw further downside in afternoon trading after the Treasury Department revealed this month’s auction of $53 billion worth of seven-year notes attracted below average demand.

The seven-year note auction drew a high yield of 0.600 percent and a bid-to-cover ratio of 2.24, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.50.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Economic data may continue to impact trading on Friday, with traders likely to keep an eye on reports on personal income and spending, Chicago-area business activity and consumer sentiment.

Source: Read Full Article