After seeing early weakness on Thursday, treasuries climbed back near the unchanged line, eventually ending the day nearly flat.
Bond prices climbed well off their early lows but were unable to sustain the upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day up by less than a basis point at 1.924 percent after reaching a high of 1.956 percent.
The early weakness among treasuries was partly due to the release of a report from the Labor Department showing a much bigger than expected drop in initial jobless claims in the week ended April 28th.
The report showed that jobless claims fell to 365,000 from the previous week's revised figure of 392,000. Economists had expected jobless claims to dip to 378,000 from the 388,000 originally reported for the previous week.
However, treasuries bounced off their lows following the release of a separate report from the Institute for Supply Management showing an unexpected slowdown in the pace of growth in the service sector in the month of April.
The ISM said its non-manufacturing index dropped to 53.5 in April from 56.0 in March, although a reading above 50 indicates continued growth in the service sector. The drop surprised economists, who had expected the index to come in unchanged.
"Respondents' comments affirm the slowing rate of growth," said Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee. "In addition, they remain concerned about rising fuel costs and the impact on shipping, transportation and petroleum-based product costs."
Treasuries remained roughly flat in afternoon trading, however, as traders seemed reluctant to make any significant moves ahead of Friday's closely watched monthly employment report.
The Labor Department's jobs report is likely to be the main driver of trading on Friday. Economists currently expect the report to show an increase of about 165,000 jobs in April, while the unemployment rate is expected to remain unchanged at 8.2 percent.
by RTT Staff Writer
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