Treasuries Show Modest Move To The Upside

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After ending the previous session nearly unchanged, treasuries moved moderately higher during trading on Thursday.

Treasuries gave back ground after an early move to the upside but bounced back more firmly into positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.1 basis points to 1.632 percent.

The uptick by treasuries came following the Federal Reserve’s repeated assurances that monetary policy is likely to remain unchanged for the foreseeable future.

The minutes of the Fed’s March meeting, released on Wednesday, reiterated that the central bank does not intend to change its ultra-loose monetary policy anytime soon.

The Fed stressed any changes to policy will be outcome-based, indicating interest rates will remain unchanged until the goals of maximum employment and inflation moderately above 2 percent for some time are achieved.

The minutes also showed officials are not concerned about the recent increase in Treasury yields, which the Fed attributed to investor optimism about the economic outlook and expectations of higher Treasury debt issuance.

Treasuries remained positive during Federal Reserve Chair Jerome Powell’s remarks at a virtual International Monetary Fund event.

Powell noted the economic recovery remains “uneven and incomplete” and cautioned that further coronavirus outbreaks could slow the pace of the recovery.

The Fed chief also continued to downplay the risk of inflation, acknowledging that there will be upward pressure on prices but arguing that it will be temporary.

At the same time, Powell stressed that the Fed would be able to react if inflation expectations rise “persistently and materially” above levels the central bank is comfortable with.

In U.S. economic news, the Labor Department released a report showing first-time claims for U.S. unemployment benefits unexpectedly increased in the week ended April 3rd.

The report said initial jobless claims edged up to 744,000, an increase of 16,000 from the previous week’s revised level of 728,000.

Jobless claims rose for the second straight week after falling to a one-year low of 658,000 in the week ended March 20th.

The continued increase surprised economists, who had expected jobless claims to drop to 680,000 from the 719,000 originally reported for the previous month.

Despite the Fed’s apparent lack of concern about inflation, trading on Friday may be impacted by reaction to a report on producer prices in the month of March.


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