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Treasuries Move Notably Higher Amid Concerns About Trade War

After moving modestly higher early in the session, treasuries saw further upside over the course of the trading day on Thursday.

Bond prices climbed firmly into positive territory in afternoon trading but gave back some ground going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 6.4 basis points 2.804 percent.

The strength among treasuries came amid concerns about a potential trade war after President Donald Trump announced the U.S. will impose new tariffs on steel and aluminum imports.

Trump told metals industry executives at a White House meeting that he would sign an order formally imposing the new sanctions next week.

"Sometime next week we'll be signing it in," Trump said. "And you're going to have protection for the first time in a long time."

Trump indicated that he plans to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports.

The tariffs are likely to benefit U.S. steel and aluminum producers, although some officials have warned of retaliation by the European Union and China.

Earlier in the day, traders were keeping a close eye on Federal Reserve Chairman Jerome Powell's second day of testimony on Capitol Hill.

Powell testified before the Senate Banking Committee after his remarks before the House Financial Services Committee on Tuesday sparked fears the Fed may raise interest rates more than previously estimated.

The Fed chief added to uncertainty about the outlook for interest rates after telling the Senate committee there has not yet been strong evidence of a decisive increase in wages.

"We see wages by a couple of measures trending up a little bit, but most of them continuing to grow at two and a half percent," Powell said.

"Nothing is suggesting to me that wage inflation is at a point of accelerating," he added. "I would expect that some continued strengthening in the labor market can take place without causing inflation."

On the U.S. economic front, the Labor Department released a report showing first-time claims for U.S. unemployment benefits unexpectedly fell to a nearly fifty-year low.

The report said initial jobless claims fell to 210,000 in the week ended February 24th, a decrease of 10,000 from the previous week's revised level of 220,000. Economists had expected jobless claims to inch up to 226,000.

With the unexpected decrease, initial jobless claims fell to their lowest level since hitting 202,000 in December of 1969.

A separate report from the Commerce Department showed personal income increased by slightly more than expected in the month of January, while personal spending rose in line with estimates.

The Commerce Department said personal income climbed by 0.4 percent in January, matching the increase seen in December. Economists had expected income to rise by 0.3 percent.

Additionally, the report said personal spending edged up by 0.2 percent in January after climbing by an upwardly revised 0.4 percent in December.

Personal spending had been expected to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

The Institute for Supply Management also released a report showing an unexpected acceleration in the pace of growth in the manufacturing sector in the month of February.

The ISM said its purchasing managers index climbed to 60.8 in February from 59.1 in January, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to edge down to 58.7.

With the unexpected increase, the purchasing managers index reached its highest level since hitting 61.4 in May of 2004.

Trading on Friday may be impacted by reaction to the University of Michigan's revised report on consumer sentiment in the month of February.

The consumer sentiment index for February is expected to be downwardly revised to 99.5 from the preliminary reading of 99.9, although that would still be up from the final January reading of 95.7.

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