Treasuries Regain Ground Following Yesterday's Sell-Off

(RTTNews) - After moving sharply lower over the course of the previous session, treasuries regained some ground during trading on Thursday.

Bond prices moved notably higher in early trading before moving roughly sideways for the remainder of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.5 basis points to 1.845 percent.

The pullback by the ten-year yield came after it surged up by 12.1 basis points on Wednesday to its highest closing level in almost a month.

Bargain hunting likely contributed to the rebound by treasuries along with weakness among stocks, which came under pressure amid concerns about the outlook for interest rates.

Traders continued to digest the minutes of the Federal Reserve's April meeting, which hinted strongly at the possibility of an interest rate hike at the central bank's next meeting in June.

The minutes revealed most participants determined it would likely be appropriate to raise rates next month if incoming economic data supports such a move.

In a speech this morning, New York Fed President William Dudley predicted June would definitely be a "live meeting" and said he is "quite pleased" to see the markets reflecting an increased probability of a rate hike in June or July.

However, analysts have noted the potential for a June rate hike will depend on the incoming data, increasing the focus on upcoming reports.

The Labor Department released a report this morning showing a pullback in initial jobless claims in the week ended May 14th.

The report said initial jobless claims fell to 278,000, a decrease of 16,000 from the previous week's unrevised level of 294,000. Economists had expected jobless claims to drop to 275,000.

With the decrease, jobless claims pulled back after reaching their highest level in fourteen months in the previous week.

A separate report from the Philadelphia Federal Reserve unexpectedly showed a continued contraction in regional manufacturing activity in the month of May.

The Philly Fed said its diffusion index for current activity edged down to a negative 1.8 in May from a negative 1.6 in April, with a negative reading indicating a contraction in regional manufacturing activity.

The slight decrease by the index came as a surprise to economists, who had expected the index to climb to a positive 3.0.

Meanwhile, the Conference Board said its index of leading economic indicators climbed by 0.6 percent in April compared to economist estimates for a 0.4 percent increase.

While the economic calendar for Friday is relatively quiet, traders are likely to keep an eye on a report on existing home sales in April.

Existing home sales are expected to rise to an annual rate of 5.40 million in April after jumping to a rate of 5.33 million in March.