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Treasuries Recover From Early Weakness To Close Modestly Higher

After seeing modest weakness in morning trading, treasuries turned higher over the course of the trading session on Thursday.

Bond prices climbed into positive territory in the afternoon, extending the rebound from yesterday's intraday lows. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.9 basis points to 2.531 percent.

The turnaround by treasuries was partly in reaction to the results of the Treasury Department's auction of $12 billion worth of thirty-year bonds, which attracted well above average demand.

The thirty-year bond auction drew a high yield of 2.867 percent and a bid-to-cover ratio of 2.74, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.32.

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

Today's thirty-year bond auction came after auctions of $24 billion worth of three-year notes and $20 billion worth of ten-year notes also attracted above average demand earlier this week.

Treasuries may also have benefited from news that China dismissed a Bloomberg News report that officials have recommended slowing or halting purchases of U.S. debt.

"The news could quote the wrong source of information, or may be fake news," China's State Administration of Foreign Exchange said, according to Reuters.

The SAFE said China has been diversifying its foreign currency reserves investments to help "safeguard the overall safety of foreign exchange assets and preserve and increase their value."

On the U.S. economic front, the Labor Department released a report showing another unexpected increase in first-time claims for U.S. unemployment benefits.

The report said initial jobless claims rose to 261,000 in the week ended January 6th, an increase of 11,000 from the previous week's unrevised level of 250,000.

The modest increase came as a surprise to economists, who had expected initial jobless claims to edge down to 245,000.

A separate report from the Labor Department unexpectedly showed a modest decrease in producer prices in the month of December.

The Labor Department said its producer price index for final demand edged down by 0.1 percent in December after climbing by 0.4 percent in November. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices still dipped by 0.1 percent in December following a 0.3 percent increase in November. Core prices had also been expected to tick up by 0.2 percent.

Economic data may attract attention on Friday, with traders likely to keep a close eye on reports on retail sales and consumer price inflation.

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