Treasuries Recover From Early Weakness To Close Modestly Higher

(RTTNews) - Treasuries showed a notable turnaround over the course of the trading session on Thursday, recovering from early weakness to end the day modestly higher.

Bond prices came under pressure early in the day but climbed into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.4 basis points to 4.571 percent after reaching a high of 4.651 percent.

The rebound by treasuries came as traders continued to digest the Federal Reserve's monetary policy announcement on Wednesday.

Traders have recently expressed some concerns the Fed's next monetary policy move could actually be an interest rate hike rather than a cut, but Fed Chair Jerome Powell post-meeting remarks seem to have alleviated those worries.

"Not only did Powell choose not to give a hawkish press conference, he took great pains to be dovish," said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance. "At every turn he looked on the bright side of data - from higher-than-expected inflation to recent lower-than-expected economic growth - and dismissed any suggestions that the Fed was pivoting from rate cuts to rate hikes." He added, "He explicitly said he believes their next move would be a cut - even if it will take longer to get to that cut than they believed a short time ago - and set the bar extremely high for rate hikes."

Earlier in the day, treasuries came under pressure in reaction to the latest batch of U.S. economic data, including a Labor Department report showing a surge by labor costs in the first quarter of 2024.

The Labor Department said unit labor costs soared by 4.7 percent in the first quarter following a revised unchanged reading in the fourth quarter.

Economists had expected labor costs to shoot up by 3.2 percent compared to the 0.4 percent increase that had been reported for the previous quarter.

"Productivity growth wasn't strong enough to significantly mitigate the rise in wages last quarter," said Nationwide Financial Markets Economist Oren Klachkin. "The strong rise in unit labor costs is another in a string of recent data points indicating that inflation pressures remain relatively high."

A separate Labor Department showed initial jobless claims came in unchanged last week, while a Commerce Department report showed the U.S. trade deficit narrowed slightly in March.

The Labor Department's monthly jobs report is likely to be in the spotlight on Friday, although a report on service sector activity may also attract attention.