Treasuries moved modestly higher during trading on Thursday, as traders looked to the safety of bonds amid the release of a batch of disappointing U.S. economic data.
After initially showing a lack of direction, treasuries moved to the upside over the course of the morning but did not see much follow-through on the upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.4 basis points to 1.618 percent.
The strength among treasuries was partly due to a report from the National Association of Realtors showing a bigger than expected drop in existing home sales in May.
NAR said existing home sales fell by 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. Economists had expected a slightly more modest decrease to an annual rate of 4.57 million.
However, NAR chief economist Lawrence Yun said, "The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand."
A separate report from the Philadelphia Federal Reserve showed that Philadelphia-area manufacturing firms indicated weaker business conditions in June, with the index of regional manufacturing activity falling to a ten-month low.
The Philly Fed said its diffusion index of current activity fell to a negative 16.6 in June from a negative 5.8 in May, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to rebound to a positive 0.5.
Additionally, the Labor Department's report on initial jobless claims in the week ended June 16th showed that claims fell modestly for the week but still came in above analyst estimates.
The release of the disappointing data came on the heels of the Federal Reserve's announcement Wednesday of the extension of its "Operation Twist" program until the end of the year.
"Operation Twist" involves replacing short-term securities in the Fed's bond portfolio with longer-term securities in an effort to push already low long-term interest rates even lower.
Fed Chairman Ben Bernanke also noted that the central bank is prepared to take additional steps to prop up the sluggish economy.
Amid a lack of major U.S. economic data on Friday, traders are likely to keep a close eye on any developments overseas.
by RTT Staff Writer
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