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Treasuries Show Strong Move Back To The Upside

After moving notably lower over the course of the previous session, treasuries showed a strong move back to the upside during trading on Thursday.

Bond prices moved higher early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid by 5.4 basis points to 2.743 percent.

With the drop on the day, the ten-year yield more than offset the increase seen on Wednesday, falling to its lowest closing level in nearly nine months.

The rebound by treasuries came as stocks on Wall Street pulled back sharply following the substantial rebound seen in the previous session.

The pullback on Wall Street came as traders looked to cash in on yesterday's rally, when the Dow recorded its biggest single-day point gain in history.

The upward move by stocks may have been exaggerated by light volume in post-holiday trading, inspiring traders to quickly pull out of their positions.

Lingering concerns about the global economic outlook and the ongoing government shutdown also led traders to move their money into safe havens such as bonds.

Treasuries also benefited from the release of a report from Conference Board showing a significant deterioration in consumer confidence in the month of December.

The Conference Board said its consumer confidence index slumped to 128.1 in December after dipping to a revised 136.4 in November.

Economists had expected the consumer confidence index to edge down to 134.0 from the 135.7 originally reported for the previous month.

The bigger than expected decrease by the headline index reflected a continued deterioration in consumer expectations, with the expectations index plunging to 99.1 in December after falling to 112.3 in November.

"While consumers are ending 2018 on a strong note, back-to-back declines in Expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019," said Lynn Franco, Senior Director of Economic Indicators at the Conference Board.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $32 billion worth of seven-year notes, which attracted slightly below average demand.

The seven-year note auction drew a high yield of 2.680 percent and a bid-to-cover ratio of 2.46, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.50.

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 seven-year note auction came after the Treasury sold $40 billion worth of two-year notes on Monday and $41 billion worth of five-year notes on Wednesday.

Any developments regarding the government shutdown may impact trading on Friday along with reports on Chicago-area business activity and pending home sales.

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