Treasuries Extend Recovery Following Mixed Economic Data

Extending the recovery rally seen over the two previous sessions, treasuries showed another strong move to the upside during trading on Thursday.

Bond prices fluctuated early in the session but climbed firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.8 basis points to 3.937 percent.

The ten-year yield closed lower for the third straight day, pulling back well off the fourteen-year closing high set on Monday.

The continued advance by treasuries came following the release of a mixed batch of U.S. economic data that failed to dent investor optimism about the Federal Reserve slowing the pace of interest rate hikes.

Following two straight quarters of contraction, the Commerce Department released a report on Thursday showing U.S. economic activity rebounded by slightly more than expected in the third quarter.

The report said real gross domestic product shot up by 2.6 percent in the third quarter following a 0.6 percent drop in the second quarter and a 1.6 percent slump in the first quarter. Economists had expected GDP to jump by 2.4 percent.

The rebound in GDP largely reflected a 2.8 percent boost from trade, as exports soared by 14.4 percent and imports, which are a subtraction in the calculation of GDP, plunged by 6.9 percent.

“Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” said Paul Ashworth, Chief North America Economist at Capital Economics.

“Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates,” he added. “We expect the economy to enter a mild recession in the first half of next year.”

A separate Commerce Department report showed new orders for U.S. manufactured durable goods increased by less than expected in the month of September.

The Commerce Department durable goods orders rose by 0.4 percent in September following a revised 0.2 percent uptick in August.

Economists had expected durable goods orders to increase by 0.6 percent in September compared to the 0.2 percent dip that had been reported for the previous month.

Excluding a jump in orders for transportation equipment, durable goods orders fell by 0.5 percent in September after coming in unchanged in August. Ex-transportation orders were expected to edge up by 0.2 percent.

The Labor Department also released a report showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended October 22nd.

The report said initial jobless claims inched up to 217,000, an increase of 3,000 from the previous week’s unrevised level of 214,000. Economists had expected initial jobless claims to edge up to 220,000.

A report on personal income and spending is likely to attract attention on Friday, as it includes a reading on inflation said to be preferred by the Fed.

Traders are also likely to keep an eye on reports on employment costs, consumer sentiment and pending home sales.

Source: Read Full Article