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Treasuries Close Roughly Flat After Seeing Initial Weakness

After initially move to the downside, treasuries recovered over the course of the trading day on Thursday before closing roughly flat.

Bond prices spent much of the afternoon bouncing back and forth across the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.331 percent.

The roughly flat close by treasuries came as traders digested reports regarding the Senate version of tax reform legislation.

The proposed bill has several key differences with the House version, including a delay in the implementation of the cut in the corporate tax rate.

The Senate bill still reduces the corporate tax rate to 20 percent from 35 percent, although the new rate does not take effect until 2019. The House bill would start the 20 percent rate next year.

The delay of the corporate tax cut in the Senate bill reflects an effort by Senators to partly offset the cost of the legislation.

The Senate bill also maintains seven tax brackets versus the four in the House bill, although the top rate is lowered to 38.5 percent from 39.6 percent.

While state and local tax deductions are completely repealed in the Senate version, the bill maintains the cap on the mortgage interest deduction at $1 million.

On the U.S. economic front, the Labor Department released a report showing a bigger than expected increase in initial jobless claims in the week ended November 4th.

The report said initial jobless claims climbed to 239,000, an increase of 10,000 from the previous week's unrevised level of 229,000. Economists had expected jobless claims to edge up to 231,000.

Meanwhile, the Treasury Department's auction of $15 billion worth of thirty-year bonds attracted slightly below average demand.

The thirty-year bond auction drew a high yield of 2.801 percent and a bid-to-cover ratio of 2.23, while the ten previous thirty-year bonds auctions had an average bid-to-cover ratio of 2.30.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Trading on Friday may continue to be impacted by reaction to the Senate tax reform bill, while a report on consumer sentiment in the month of November may also attract attention.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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