Treasuries Close Modestly Lower After Thirty-Year Bond Auction

(RTTNews) - Treasuries moved moderately lower during trading on Thursday, offsetting the modest strength seen in the previous session.

After seeing early weakness, bond prices regained some ground but moved back to the downside in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 2 basis points to 1.757 percent.

With the modest uptick on the day, the ten-year yield regained some ground after ending Wednesday's trading at its lowest closing level in a month.

The pullback shown by treasuries in afternoon trading came as the Treasury Department's auction of $15 billion worth of thirty-year bonds attracted below average demand.

The thirty-year bond auction drew a high yield of 2.615 percent and a bid-to-cover ratio of 2.19, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.34.

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

Today's thirty-year bond auction came after the Treasury sold $24 billion worth of three-year notes on Tuesday and $23 billion worth of ten-year notes on Wednesday.

On the U.S. economic front, the Labor Department released a report this morning showing an unexpected increase in initial jobless claims in the week ended May 7th.

The report said initial jobless claims climbed to 294,000, an increase of 20,000 from the previous week's unrevised level of 274,000. The increase surprised economists, who had expected jobless claims to edge down to 270,000.

With the unexpected increase, jobless claims rose to their highest level since reaching 310,000 in the week ended February 28, 2015.

On the heels of last Friday's disappointing monthly jobs report, the data raised some concerns about the labor market, although analysts noted the increase may primarily reflect seasonal adjustments.

"It is notoriously difficult to seasonally adjust weekly data," said Chris Low, chief economist at FTN Financial. "Watch the 4-wk average. If it remains near current levels, there's nothing to worry about. If it starts to rise in the next few weeks, it's a signal of slower employment growth to come."

The Labor Department said the four-week moving average reached 268,250 last week, an increase of 10,250 from the previous week's unrevised average of 258,000.

Friday will see the release of some highly anticipated U.S. economic data, with traders likely to keep a close eye on reports on retail sales, producer prices, and consumer sentiment.