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Treasuries See Further Upside As Traders Digest Fed Statement

Extending the upward move seen late in the previous session, treasuries moved notably higher over the course of the trading day on Thursday.

Bond prices pulled back off their best levels going into the close but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid by 6 basis points to 2.635 percent.

With the continued decrease on the day, the ten-year yield ended the session at its lowest closing level in almost a month.

Treasuries continued to benefit from the Federal Reserve's message of patience in its statement announcing the widely expected decision to leave interest rates unchanged.

The Fed said Wednesday it had decided to maintain the target range for the federal funds rate at 2.25 to 2.50 percent.

The accompanying statement included some notable changes from last month, including dropping a reference to the Fed's plan for further gradual rate increases.

The central bank also removed a sentence describing the risks to the economic outlook as "roughly balanced."

Instead, the Fed said still sees a sustained expansion of economic activity, strong labor market conditions, and inflation near its symmetric 2 percent objective as the most likely outcomes but also pointed to global economic and financial developments and muted inflation pressures.

The Fed subsequently said it will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support those outcomes.

Fed Chairman Jerome Powell noted in his press conference that the "case for raising rates has weakened somewhat."

The statement has eased worries about the outlook for rates but has led to some concerns about what the Fed is seeing regarding the outlook for the economy.

In economic news, the Labor Department released a report showing a significant rebound in initial jobless claims in the week ended January 26th.

The report said initial jobless claims surged up to 253,000, an increase of 53,000 from the previous week's revised level of 200,000. Economists had expected jobless claims to rise to 215,000.

With the much bigger than expected increase, jobless claims reached their highest level since hitting 254,000 in September of 2017.

The slightly upwardly revised reading on jobless claims in the previous week was still the lowest since a matching figure in October of 1973.

Meanwhile, a separate report from the Commerce Department showed new home sales rebounded by much more than anticipated in November.

The report released Thursday showed new home sales soared by 16.9 percent to an annual rate of 657,000 in November after plunging by 8.3 percent to a revised rate of 562,000 in October.

Economists had expected new home sales to rise to a rate of 560,000 from the 544,000 originally reported for the previous month.

Trading on Friday is likely to be driven by reaction to the Labor Department's closely watched monthly employment report.

Employment is expected to rise by 165,000 jobs in January after spiking by 312,000 jobs in December, while the unemployment rate is expected to hold at 3.9 percent.

The jobs data is likely to overshadow separate reports on manufacturing activity and consumer sentiment as well as the release of delayed data on construction spending and wholesale inventories.

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