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Treasuries Regain Ground Following Recent Weakness

After trending lower over the past few sessions, treasuries regained some ground during the trading day on Thursday.

Bond prices moved to the upside early in the day and remained firmly positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.971 percent.

There rebound by treasuries came following the release of a Labor Department report showing a slightly smaller than expected increase in consumer prices in the month of April.

The Labor Department said its consumer price index rose by 0.2 percent in April after edging down by 0.1 percent in March. Economists had expected consumer prices to climb by 0.3 percent.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent in April after rising by 0.2 percent in the previous month. Core prices had been expected to rise by 0.2 percent.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the smaller than expected increase in core prices suggests that the recent surge in underlying inflation is fading.

"Even so, core inflation on the Fed's preferred PCE measure has still accelerated faster than Fed officials anticipated just a few months ago, which will keep the Fed on track to raise interest rates again in June," Pearce said.

A separate report from the Labor Department showed initial jobless claims unexpectedly came in unchanged in the week ended May 5th.

The report said initial jobless claims came in at 211,000, unchanged from the previous week's unrevised level. Economists had expected jobless claims to rise to 218,000.

Treasuries remained firmly positive following the release of the results of the Treasury Department's auction of $17 billion worth of thirty-year bonds, which attracted average demand.

The thirty-year bond auction drew a high yield of 3.130 percent and a bid-to-cover ratio of 2.38, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.39.

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 the Treasury sold $31 billion worth of three-year notes on Tuesday and $25 billion worth of ten-year notes on Wednesday.

Trading on Friday may be impacted by reaction to reports on import and export prices in April and consumer sentiment in May.

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