Treasuries Give Back Ground Following Yesterday's Rally

(RTTNews) - After moving sharply higher in the previous session, treasuries gave back some ground during trading on Thursday.

Bond prices climbed off their worst levels in afternoon trading but remained in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.2 basis points to 3.397 percent.

Profit taking contributed to the pullback by treasuries after the ten-year yield tumbled to a four-month closing low on Wednesday.

The pullback by treasuries also came as a report from the Labor Department unexpectedly showing a decrease in first-time claims for U.S. unemployment benefits added to concerns about the outlook for interest rates.

The Labor Department said initial jobless claims fell to 190,000 in the week ended January 14th, a decrease of 15,000 from the previous week's unrevised level of 205,000. The dip surprised economists, who had expected jobless claims to rise to 214,000.

"While initial jobless claims continue to be noisy due to seasonal adjustment factors, the unexpected drop in the latest week is a frustrating reminder for the Fed that the labor market remains tight as employers hold onto workers," said Matthew Martin, US Economist at Oxford Economics.

He added, "Our forecast assumes one more 25bps rate hike at the conclusion of the upcoming FOMC meeting, but we see risks as skewed toward additional rate hikes."

The Commerce Department also released a report showing new residential construction in U.S. fell for the fourth straight month in December, although the decrease was much smaller than expected.

The report said housing starts slumped by 1.4 percent to an annual rate of 1.382 million in December after tumbling by 1.8 percent to a revised rate of 1.401 million in November.

Economists had expected housing starts to plunge by 4.8 percent to an annual rate of 1.359 million from the 1.427 million originally reported for the previous month.

The Commerce Department said building permits also dove by 1.6 percent to an annual rate of 1.330 million in December after plummeting by 10.6 percent to a revised rate of 1.351 million in December.

Building permits, an indicator of future housing demand, were expected to jump by 2.1 percent to an annual rate of 1.370 million from the 1.342 million originally reported for the previous month.

Meanwhile, the Federal Reserve Bank of Philadelphia released a report showing regional manufacturing activity has contracted at a slower rate in the month of January.

Following the slew of U.S. economic data released over the past two days, the economic calendar is relatively light on Friday, although a report on existing home sales may still attract some attention.