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Treasuries Move To The Upside In Late-Day Trading

After showing a lack of direction throughout most of the session, treasuries moved to the upside in the final hour of trading on Thursday.

Bond prices managed to remain firmly positive going into the close of trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.3 basis points to 2.038 percent.

The late-day strength among treasuries came as comments from New York Federal Reserve President John Williams seemed to endorse a near-term interest rate cut by the Fed.

In remarks at the Central Bank Research Association's annual meeting in New York, Williams argued it "pays to act quickly to lower rates at the first sign of economic distress."

"My wife is a professor of nursing, and she says one of the best things you can do for your children is to get them vaccinated," Williams said. "It's better to deal with the short-term pain of a shot than to take the risk that they'll contract a disease later on."

"I think about monetary policy near the zero lower bound—or ZLB for short—in much the same way," he added. "It's better to take preventative measures than to wait for disaster to unfold."

Williams' comments come after the minutes of the latest Fed meeting noted several participants believed a near-term rate cut was appropriate from a risk-management perspective, as it could help cushion the effects of possible future adverse shocks to the economy.

Treasuries showed a lack of direction earlier in the day as traders digested a mixed batch of U.S. economic data, including a Labor Department report showing a modest rebound in first-time claims for U.S. unemployment benefits in the week ended July 13th.

The report said initial jobless claims inched up to 216,000, an increase of 8,000 from the previous week's revised level of 208,000.

The uptick came after the drop seen in the previous week pulled jobless claims down to their lowest level since hitting a nearly 50-year low in the week ended April 13th.

A separate report from the Philadelphia Federal Reserve showed its reading on regional manufacturing activity jumped much more than expected in the month of July.

The Philly Fed said its diffusion index for current general activity surged up to 21.8 in July after tumbling to 0.3 in June, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 5.0.

Meanwhile, the Conference Board released a report showing an unexpected decrease by its index of leading U.S. economic indicators in the month of June.

The Conference Board said its leading economic index fell by 0.3 percent in June after coming in unchanged in May. The drop surprised economists, who had expected the index to inch up by 0.1 percent.

"As the US economy enters its eleventh year of expansion, the longest in US history, the LEI suggests growth is likely to remain slow in the second half of the year," said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.

A preliminary report on consumer sentiment in July may attract attention on Friday along with comments by St. Louis Fed President James Bullard, who voted to cut interest rates by 25 basis points at the last Fed meeting.

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