Treasuries Move Notably Lower Amid Expectations Of Rate Hike

After ending the previous session modestly lower, treasuries saw some further downside during the trading day on Thursday.

Bond prices moved to the downside early in the session and remained firmly negative throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.7 basis points to 2.356 percent.

The weakness among treasuries came as traders continued to digest Wednesday’s monetary policy announcement by the Federal Reserve.

The Fed’s indication of its expectation that slowing economic growth during the first quarter is likely to be transitory has reinforced expectations the central bank will raise interest rates next month.

On the economic front, a report released by the Labor Department showed that first-time claims for unemployment benefits fell by more than anticipated in the week ended April 29th.

The report said initial jobless claims dropped to 238,000, a decrease of 19,000 from the previous week’s unrevised level of 257,000. Economists had expected jobless claims to dip to 247,000.

Meanwhile, the Labor Department released a separate report showing an unexpected drop in labor productivity in the first quarter along with a bigger than expected jump in unit labor costs.

The Labor Department said productivity fell by 0.6 percent in the first quarter after surging up by a revised 1.8 percent in the fourth quarter. Economists had expected productivity to come in unchanged.

The report also said unit labor costs spiked by 3.0 percent in the first quarter following a revised 1.3 percent increase in the fourth quarter. Unit labor costs had been expected to climb by 2.5 percent.

Separately, the Commerce Department released a report showing that the trade deficit was little changed in March amid drops in both imports and exports.

The Commerce Department said the trade deficit narrowed to $43.7 billion in March from a revised $43.8 billion in February. The trade deficit had been expected to widen to $44.5 billion.

A separate report from the Commerce Department said factory orders crept up by 0.2 percent in March after surging up by a revised 1.2 percent in February. Economists had expected factory orders to rise by 0.4 percent.

Trading activity on Friday is likely to be driven by reaction to the Labor Department’s closely watched monthly jobs report.

Employment is expected to increase by 180,000 jobs in April after rising by 98,000 jobs in March. The unemployment rate is expected to tick up to 4.6 percent from 4.5 percent.

Following the jobs report, traders are likely to keep an eye on speeches by several Fed officials, including Fed Chair Janet Yellen.

The material has been provided by InstaForex Company – www.instaforex.com

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