After fluctuating early in the session, treasuries showed a substantial move to the downside over the course of the trading day on Thursday.
Bond prices moved sharply lower in mid-day trading and remained firmly negative going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8 basis points to 1.550 percent.
The ten-year yield extended the rebound seen in the previous session, reaching its highest closing level in over a year.
The mid-day sell-off by treasuries came as traders reacted to highly anticipated comments by Federal Reserve Chair Jerome Powell.
Speaking during The Wall Street Journal Jobs Summit, Powell acknowledged the reopening of the economy could “create some upward pressure on prices.”
However, Powell suggested the increase in the annual rate of inflation would largely reflect comparisons to the low prices seen a year ago.
The Fed chief said he expects the increase in inflation to be “transitory” and stressed there is “a lot of ground to cover” before price growth reaches a sustainable level above the Fed’s 2 percent target.
Powell said the recent spike in bond yields has “caught my attention,” and he would be “concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals.”
Nonetheless, the Fed chief did not signal a “twist” in the central bank’s asset purchases as some investors had been hoping for, leading to the surge in yields.
On the economic front, the Labor Department released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended February 27th.
The report said initial jobless claims inched up to 745,000, an increase of 9,000 from the previous week’s revised level of 736,000.
Economists had expected jobless claims to rise to 750,000 from the 730,000 originally reported for the previous week.
A separate report released by the Commerce Department showed a bigger than expected increase in new orders for U.S. manufactured goods in the month of January.
Trading on Friday may be impacted by reaction to the Labor Department’s closely watched monthly employment report for February.
Economists currently expect employment to increase by 182,000 jobs in February after rising by 49,000 jobs in January. The unemployment rate is expected to hold at 6.3 percent.
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