After seeing early strength, treasuries saw considerable volatility following the Federal Reserve's monetary policy announcement and eventually ended the day mixed.
Bond prices showed big swings following the release of the Fed statement before ending the session on opposite sides of the unchanged line.
The yield on the benchmark ten-year note, which moves opposite of its price, ended the day nearly flat, down by less than a basis point at 1.756 percent.
While the yield on the five-year note also fell by 4.2 basis points to 0.654 percent, the yield on the thirty-year bond rose by 4.1 basis points to 2.967 percent.
The volatility in the bond market came after the Fed announced a plan to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.
The Fed also announced the continuation of its "Operation Twist" program, saying that the actions taken together will increase the central bank's holdings of longer-term securities by about $85 billion each month through the end of the year.
Looking ahead, the Fed said it would continue its purchases of mortgage-backed securities until the outlook for the labor market improves substantially.
The central bank also left interest rates at near-zero levels and said exceptionally low rates are likely to be warranted at least through mid-2015.
Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, Bernanke gave us what many should have expected after his Jackson Hole speech where he defended previous QE and gave his 'grave' concerns with the labor market comment."
With the focus on the Fed, traders largely shrugged off a report from the Labor Department showing a bigger than expected increase in weekly jobless claims.
Labor Department officials noted that the increase in jobless claims was partly due to the impact of Hurricane Isaac, as major storms can often delay unemployment filings.
A separate report from the Labor Department showed that a substantial rebound in energy prices contributed to a bigger than expected increase in producer prices in the month of August.
Trading on Friday could be impacted by the release of a slew of U.S. economic data, including reports on retail sales, consumer prices, and industrial production.
by RTT Staff Writer
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