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Treasuries Give Back Ground But Close Well Off Worst Levels

After moving sharply higher over the past several sessions, treasuries gave back some ground during trading on Thursday.

Bond prices climbed well off their worst levels in afternoon trading but remained in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.2 basis points to 1.716 percent.

With the increase on the day, the ten-year yield rebounded after ending Wednesday's trading at its lowest closing level in almost three years.

The pullback by treasuries came as a report from the Chinese customs office showing unexpected annual growth in Chinese exports reduced the appeal of safe haven assets like bonds.

The report said Chinese exports in July were up by 3.3 percent compared to the same month a year ago, while economists had expected a 2 percent decrease.

While the report also showed a 5.6 percent year-over-year drop in Chinese imports, that was smaller than the 8.3 percent slump expected by economists.

The data has eased concerns about the impact of the U.S.-China trade dispute even though it reflects a period before the latest escalation in the trade war.

Meanwhile, China's central bank set the midpoint for the yuan above 7.00 per dollar the first time in a decade, but it was not as weak as many had expected.

Treasuries climbed off their worst levels following the release of the results of the Treasury Department's auction of $19 billion worth of thirty-year bonds, which attracted average demand.

The thirty-year bond auction drew a high yield of 2.335 percent and a bid-to-cover ratio of 2.24, which matched the average bid-to-cover ratio from the ten previous thirty-year bonds auctions.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Earlier this week, the Treasury revealed its auction of $38 billion worth of three-year notes and $27 billion worth of ten-year notes both attracted below average demand.

On the U.S. economic front, the Labor Department released a report unexpectedly showing a modest decrease in first-time claims for unemployment benefits in the week ended August 3rd.

The report said initial jobless claims dipped to 209,000, a decrease of 8,000 from the previous week's revised level of 217,000.

Economists had expected jobless claims to come in unchanged compared to the 215,000 originally reported for the previous week.

A report on producer prices may attract attention on Friday, as traders hope tame inflation data will inspire the Federal Reserve to continue cutting interest rates.

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