Plus   Neg

Treasuries Show Notable Downturn After Seeing Initial Strength

Treasuries showed a significant downturn over the course of the trading day on Thursday, extending the slide seen over the past several sessions.

Bond prices saw initial strength but pulled back well off their highs and firmly into negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.8 basis points to 1.791 percent.

The ten-year yield closed higher for the fifth time in the past six sessions, reaching its highest closing level in over a month.

Treasuries pulled back off their early highs in reaction to the European Central Bank's monetary policy decision, with the ECB cutting rates and announcing a massive new bond-buying program.

The ECB lowered its main deposit rate by 10 basis points to 0.50 percent and announced plans to restart its quantitative easing program by purchasing assets at a pace of 20 billion euros per month beginning November 1st.

The central bank said it expects to keep interest rates at their present or lower levels until it has seen a sufficient increase in the inflation outlook.

The asset purchase program is expected to run for as long as necessary to reinforce the accommodative impact of the ECB's policy rates.

Selling pressure intensified after report from Bloomberg News said Trump administration officials have discussed offering an interim trade agreement to China.

Citing five people familiar with the matter, Bloomberg said the limited trade agreement would delay and even roll back some U.S. tariffs for the first time in exchange for Chinese commitments on intellectual property and agricultural purchases.

The people told Bloomberg some of President Donald Trump's top trade advisers have discussed the plan ahead of face-to-face negotiations with Chinese officials in the coming weeks.

However, a senior White House official subsequently told CNBC the U.S. is "absolutely not" considering an interim trade deal.

Treasuries remained firmly negative as President Donald Trump had also revealed in a post on Twitter that he is temporarily delaying raising tariffs on $250 billion worth of Chinese imports.

Calling the move a "gesture of good will," Trump delayed raising the tariffs rate from 25 percent to 30 percent from October 1st to October 15th.

Trump said in a separate tweet that China is expected to purchase large amounts of U.S. agricultural products, although the Chinese have not followed through on previous pledges.

Treasury Secretary Steven Mnuchin claimed in an interview with CNBC that Trump could strike a trade deal with China at "any time" but only wants to do a "good deal."

"President Trump is only going to agree to a deal if it's a good deal, a deal that's good for U.S. companies and U.S. workers," Mnuchin said.

Meanwhile, bond traders largely shrugged off the results of the Treasury Department's auction of $16 billion worth of thirty-year bonds, which attracted average demand.

The thirty-year bond auction drew a high yield of 2.270 percent and a bid-to-cover ratio of 2.22, which matched the average bid-to-cover ratio from the ten previous thirty-year bond 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.

Reports on retail sales and consumer sentiment are likely to be in focus on Friday, as strength in consumer spending has recently helped prop up the U.S. economy amid signs of weakness in other sectors.

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