Treasuries Turn Lower After Seeing Initial Strength

(RTTNews) - After showing an initial move to the upside, treasuries turned lower over the course of the trading session on Thursday.

Bond prices slid into negative territory over the course of the morning and remained in the red throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.8 basis points to 2.711 percent.

The pullback by treasuries came after a Commerce Department report showed U.S. economic growth slowed by less than expected in the fourth quarter of 2018, reducing the appeal of safe havens such as bonds.

The report said real gross domestic product climbed by 2.6 percent in the fourth quarter compared to the 3.4 percent jump in the third quarter. Economists had expected GDP to increase by 2.3 percent.

The bigger than expected increase in GDP came as consumer spending growth slowed but continued to make a strong contribution to the economy.

Consumer spending jumped by 2.8 percent in the fourth quarter after surging up by 3.5 percent in the third quarter.

The report also showed positive contributions from non-residential fixed investment, exports, private inventory investment, and federal government spending.

However, negative contributions from residential fixed investment and state and local government spending limited the upside.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the details of the report show "better-than-forecast contributions from domestic consumption and business investment."

"Nevertheless, as a result of the already-reported weakness in retail sales and exports in the final month of last year, we expect first-quarter GDP growth to be a more disappointing 1.5% annualized," he added.

The GDP data offset the initial buying interest generated by news the summit between President Donald Trump and North Korean leader Kim Jong Un ended abruptly without an agreement on the denuclearization of the Korean peninsula.

Trump told reporters the North Korean dictator wanted the U.S. to lift all sanctions without having to give up all of his weapons of mass destruction.

"Basically, they wanted the sanctions lifted in their entirety and we couldn't do that," Trump said. "They were willing to de-nuke a large portion of the areas that we wanted, but we couldn't give up all of the sanctions for that."

"So we continue to work and we'll see, but we had to walk away from that particular suggestion," he added. "We had to walk away from that."

Economic data is likely to continue to attract attention on Friday, with traders keeping an eye on reports on personal income and spending, manufacturing activity, and consumer sentiment.