Treasuries Move To Upside Even As Fed Hints At Tapering Bond Purchases

After ending the yesterday’s volatile session modestly lower, treasuries moved to upside during the trading day on Thursday.

Bond prices moved higher early in the day and remained firmly positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 1.242 percent.

The strength among treasuries came even though the minutes of the Federal Reserve’s latest monetary policy meeting indicated the central bank plans to begin scaling back its bond purchases this year.

While the minutes showed most Fed officials believe the economic is close to satisfying the “substantial further progress” towards its dual goals criterion, there was still some disagreement over the timing of tapering the asset purchases.

Bond traders may believe some disappointing economic data since the July meeting will lead the Fed to put tapering on hold amid the surge in coronavirus cases.

However, potentially adding evidence to Fed officials’ view that the economy is close to the goal of maximum employment, the Labor Department released a report this morning showing initial jobless claims fell to a new pandemic-era low in the week ended August 14th.

The Labor Department said initial jobless claims fell to 348,000, a decrease of 29,000 from the previous week’s revised level or 377,000.

Economists had expected jobless claims to edge down to 363,000 from the 375,000 originally reported for the previous week.

Initial jobless claims decreased for the fourth consecutive week, falling to their lowest level since hitting 256,000 in the week ended March 14, 2020.

Following the slew of economic news over the past few days, the economic calendar is quiet on Friday, potentially leading to a light trading day.

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