Treasuries Close Roughly Flat Following Volatile Trading Day

(RTTNews) - Treasuries saw considerable volatility over the course of the trading day on Thursday before ending the session roughly flat.

After seeing early strength, bond prices turned lower as the day progressed but climbed back near the unchanged line going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.447 percent.

The choppy trading seen on the day came as traders digested a mixed batch of economic data, including a report from the Commerce Department showing a notable contraction in first quarter GDP.

The revised data showed that GDP fell by 1.0 percent in the first quarter compared to the initial estimate for a 0.1 percent uptick.

The drop marked the first contraction in GDP since the first quarter of 2011 and was steeper than the 0.5 percent drop expected by economists.

The first quarter data was largely viewed as old news, however, with traders generally expecting a rebound in activity in the second quarter.

A separate report from the National Association of Realtors showed that pending home sales increased for the second consecutive month in April, although the pace of growth was slower than economists had anticipated.

NAR said its pending home sales index rose 0.4 percent to 97.8 in April after jumping 3.4 percent to 97.4 in March. Economists had expected the index to climb by 1.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Meanwhile, the Labor Department also released a report showing a bigger than expected drop in initial jobless claims.

The report said initial jobless claims fell to 300,000 in the week ended May 24th, a decrease of 27,000 from the previous week's revised level of 327,000. Economists had been expecting jobless claims to dip to 317,000.

With the bigger than expected decrease, jobless claims pulled back near the seven-year low of 298,000 set in the week ended May 10th.

Bond traders also kept an eye on the results of the Treasury Department's auction of $29 billion worth of seven-year notes.

The seven-year note auction drew a high yield of 2.010 percent and a bid-to-cover ratio of 2.60, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.55.

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, "The near 7-month low in 7-year treasury note yields resulted in another uneventful auction following similar results in the 2-year and 5-year over the past two days."

"Bottom line, there was no real turn off by the lowest yields of 2014 but there was also no momentum buyers looking for even lower yields," he added.

Trading on Friday may be impacted by another batch of economic data, including reports on personal income and spending, consumer sentiment, and Chicago-area business activity.