Treasuries Close Nearly Flat Despite Solid Thirty-Year Bond Auction

(RTTNews) - Despite a solid thirty-year bond auction, treasuries pulled back off their highs for the session to end Thursday's trading nearly flat.

Bond prices saw modest strength for much of the day but closed only slightly above the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.531 percent.

The modest strength seen for most of the session came following the release of a report from the Labor Department showing an unexpected increase in initial jobless claims in the week ended September 6th.

The Labor Department said initial jobless claims climbed to 315,000, an increase of 11,000 from the previous week's revised level of 304,000. Economists had expected claims to edge down to 300,000.

The unexpected increase in jobless claims came on the heels of last week's disappointing monthly jobs report, although the Labor Department noted that the weekly data was likely impacted by the Labor Day holiday last Monday.

Geopolitical concerns also increased the appeal of treasuries after President Barack Obama confirmed that the U.S. will expand its military campaign against the terrorist group known as the Islamic State.

Nonetheless, buying interest remained relatively subdued as traders continued to express uncertainty about the outlook for interest rates.

Traders also seemed reluctant to make any significant move ahead of the release of some key economic data on Friday.

As mentioned above, traders also largely shrugged off the results of the Treasury Department's auction of $13 billion worth of thirty-year bonds, which attracted above average demand.

The thirty-year bond auction drew a high yield of 3.24 percent and a bid-to-cover ratio of 2.67, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.40.

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

Peter Boockvar, managing director at the Lindsey Group, said, "As insurance companies and pension funds traffic in this maturity much more so than shorter ones, the 30-year has its own supply/demand dynamic."

"That said, the 20 basis point move up in yield over the past few weeks definitely made it more attractive at the same time inflation expectations keep dropping coincident with the fall in commodity prices," he added.

Trading on Friday may be impacted by the release of some key economic data, including reports on retail sales, import and export prices, and consumer sentiment.