After coming under pressure following the Federal Reserve’s monetary policy announcement on Wednesday, treasuries regained some ground during trading on Thursday.
Bond prices showed a notable move to the upside in early trading and remained firmly positive throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.1 basis points to 1.807 percent.
The rebound by treasuries came following the release of a slew of U.S. economic data, including a Commerce Department report showing stronger than expected GDP growth in the fourth quarter of 2021.
The report showed real gross domestic product spiked by 6.9 percent in the fourth quarter after jumping by 2.3 percent in the third quarter. Economists had expected GDP to surge up by 5.5 percent.
However, economists pointed out the strong GDP growth was primarily due to a massive surge in business inventories, which added 4.9 percentage points, the second largest contribution since 1987.
“While normally such a large inventory build would be very negative for future growth, in today’s environment it points to an easing of supply-chain snarls and means consumers will have more products to purchase once the winter lull passes,” said Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics.
The Labor Department also released a report showing initial jobless claims pulled back in the week ended January 22nd following a bigger than expected increase in the previous week.
The report said initial jobless claims fell to 260,000, a decrease of 30,000 from the previous week’s revised level of 290,000.
Economists had expected jobless claims to drop to 260,000 from the 286,000 originally reported for the previous week.
Meanwhile, the Commerce Department released a separate report showing new orders for durable goods fell by more than expected in the month of December amid a sharp pullback in orders for transportation equipment.
The report said durable goods orders slumped by 0.9 percent in December after soaring by an upwardly revised 3.2 percent in November.
Economists had expected durable goods orders to decrease by 0.5 percent compared to the 2.6 percent spike that had been reported for the previous month.
Excluding the steep drop in orders for transportation equipment, durable goods orders rose by 0.4 percent in December after jumping by 1.1 percent in November. Ex-transportation orders were expected to increase by 0.5 percent.
The National Association of Realtors also released a report showing pending home sales tumbled by much more than expected in the month of December.
NAR said its pending home sales index plunged by 3.8 percent to 117.7 in December after sinking by 2.3 percent to a downwardly revised 122.3 in November.
Economists had expected pending home sales to edge down by 0.2 percent compared to the 2.2 percent slump originally reported for the previous month.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
Separately, the Treasury Department revealed that this month’s auction of $53 billion worth of seven-year notes attracted modestly above average demand.
The seven-year note auction drew a high yield of 1.769 percent and a bid-to-cover ratio of 2.36, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.30.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Earlier this week, the Treasury revealed this month’s auction of $54 billion worth of two-year notes and $55 billion worth of five-year notes both attracted above average demand.
The economic calendar is comparatively quiet on Friday, although traders are still likely to keep an eye on reports on personal income and spending and consumer sentiment.
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