Treasuries Close Modestly Lower, Extending Yesterday's Pullback

(RTTNews) - Treasuries ended Thursday's trading modestly lower, extending the pullback seen following yesterday's monetary policy announcement from the Federal Reserve.

After turning lower over the course of the morning, bond prices regained some ground in the afternoon but remained in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.5 basis points to 2.542 percent.

The modest weakness among treasuries came as traders continued to digest Wednesday's Fed announcement, which generated some uncertainty about the outlook for monetary policy.

While the Fed maintained the pace of its asset purchases at $85 billion a month as was widely expected, the accompanying statement was seen as less dovish than anticipated.

The statement raised concerns that the Fed might not delay plans to begin tapering its stimulus program for as long as previously anticipated.

Some selling pressure was also generated by a report from MNI Indicators showing a substantial acceleration in the pace of growth in Chicago-area business activity in the month of October.

MNI Indicators said the Chicago Business Barometer jumped to 65.9 in October from 55.7 in September, with a reading above 50 indicating growth in Chicago-area business activity. Economists had expected the index to edge down to 55.0.

Chris Low, chief economist at FTN Financial, said, "The Chicago PMI is more volatile than the national ISM, meaning tomorrow's ISM index likely won't be as strong."

"Nevertheless, the size of the increase in Chicago suggests surprisingly strong manufacturing growth despite the shutdown," he added.

Trading on Friday is likely to be impacted by reaction to the Institute for Supply Management's report on national manufacturing activity in the month of October. Economists expect the ISM's manufacturing index to dip to 55.0 from 56.2.