Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - After coming under pressure in morning trading on Thursday, treasuries regained some ground in the afternoon but still closed in the red. Bond prices staged a notable recovery attempt in the second half of the day, closing well off their lows for the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.8 basis points to 2.693 percent after reaching a high of 2.726 percent.

With the modest increase on the day, the ten-year yield bounced off the two-month closing low set in the previous session.

The early weakness among treasuries came as traders cashed in on some of the recent strength among bonds, which have benefited from their safe-haven appeal amid the weakness among emerging market assets.

A report showing that the pace of U.S. economic growth slowed in the fourth quarter but matched economist estimates also reduced the appeal of bonds.

The Commerce Department said gross domestic product increased by 3.2 percent in the fourth quarter compared to the 4.1 percent growth seen in the third quarter.

The report also said growth in consumer spending accelerated to 3.3 percent in the fourth quarter from 2.0 percent in the third quarter. The increase reflected the fastest growth since the fourth quarter of 2010.

Traders seemed to shrug off separate reports showing a bigger than expected increase in weekly jobless claims and a sharp drop in pending home sales.

The recovery attempt by treasuries came on the heels of the Treasury Department's auctions of both five-year and seven-year notes.

The five-year note auction drew a high yield of 1.572 percent and a bid-to-cover ratio of 2.59, while the -year note auction drew a high yield of 2.19 percent and a bid to-cover ratio of 2.65.

The level of demand, as measured by the bid-to-cover ratios, was roughly in line with average seen in the ten previous auctions.

Trading on Friday could be impacted by another batch of economic data, including reports on personal income and spending, consumer sentiment, and Chicago-area business activity.