Treasuries saw notable strength during trading on Thursday, benefiting from a sharp pullback by stocks as well as lingering concerns about the financial situation in Europe.
After showing a strong move to the upside in early trading, bond prices remained firmly positive throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.4 basis points to 1.577 percent.
The strength among treasuries came as stocks pulled back sharply after moving mostly higher over the course of the two previous sessions.
Treasuries also benefited from continued concerns about the European debt crisis as European leaders began a two-day summit in Brussels.
Most traders are not optimistic about the summit resulting in any meaningful solutions, as German Chancellor Angela Merkel has already ruled out the idea of common eurozone bonds.
Peter Boockvar, managing director at Miller Tabak, said, "Those countries in need of help will go hat in hand in a disguised way by trying to convince Germany to be the euro zone insurance company and those not in need will be looking for more central oversight of the debt/growth sinners."
Meanwhile, traders largely shrugged off the Labor Department's report on initial jobless claims in the week ended June 23rd.
The report showed that jobless claims dipped to 386,000 from the previous week's revised figure of 392,000. Economists had expected jobless claims to edge down to 385,000 from the 387,000 originally reported for the previous week.
"Bottom line, the jobs picture is still lackluster and certainly getting no help from the slowing global economy," Boockvar said.
A separate report from the Commerce Department showed that U.S. GDP increased by 1.9 percent in the first quarter, unrevised from the previous estimate and in line with the expectations of economists.
Treasuries saw continued strength after the Treasury Department released the results of its auction of $29 billion worth of seven-year notes.
The seven-year note auction drew a high yield of 1.075 percent and a bid-to-cover ratio of 2.64, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.84.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
While developments in Europe are likely to take center stage on Friday, trading could also be impacted by the release of U.S. reports on personal income and spending, consumer sentiment, and Chicago-area manufacturing activity.
by RTT Staff Writer
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