Treasuries See Further Downside Following Thirty-Year Bond Auction

After moving modestly lower early in the session, treasuries saw further downside over the course of the trading day on Thursday.

Bond prices came under pressure in the latter part of the trading day, closing firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.6 basis points to 0.716 percent.

The ten-year yield closed higher for the fifth consecutive session, ending the day at its highest closing level in nearly two months.

Treasuries showed a notable move to the downside after the Treasury Department revealed the results of its auction of $26 billion worth of thirty-year bonds, which attracted well below average demand.

The thirty-year bond auction drew a high yield of 1.406 percent and a bid-to-cover ratio of 2.14, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.37.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The modest weakness seen earlier in the day came after the Labor Department released a report showing first-time claims for U.S. unemployment benefits declined by much more than anticipated in the week ended August 8th.

The Labor Department said initial jobless claims tumbled to 963,000, a decrease of 228,000 from the previous week’s revised level of 1.191 million.

Economists had expected jobless claims to slide to 1.120 million from the 1.186 million originally reported for the previous week.

With the much bigger than expected decrease, jobless claims dropped below 1 million for the first time since the week ended March 14th.

“The drop in claims reflects economic reopening, but it also suggests the expiration of federal supplemental unemployment benefits may have convinced some people to stop collecting and find work,” said Chris Low, Chief Economist at FHN Financial.

He added, “Alternatively, people could be falling off rolls because they no longer qualify for assistance in the absence of the emergency expansion of eligibility.”

Trading on Friday may be impacted by reaction to a slew of U.S. economic data, with traders likely to keep a close eye on reports on retail sales, industrial production and consumer sentiment.

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