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Treasuries Extend Pullback Despite Unexpected Decrease In GDP

Treasuries moved to the downside during trading on Thursday, extending the pullback seen in the previous session.

Bond prices moved lower early in the session and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.5 basis points to 2.863 percent.

The continued weakness among treasuries came as traders remained worried about the outlook for interest rates even though the Commerce Department released a report showing U.S. economic activity unexpectedly contracted in the first quarter of 2022.

The report said real gross domestic product declined by 1.4 percent in the first quarter after spiking by 6.9 percent in the fourth quarter of 2021. The pullback surprised economists, who had expected GDP to increase by 1.1 percent.

The Commerce Department said the unexpected drop in GDP reflected decreases in private inventory investment, exports, and government spending along with an increase in imports, which are a subtraction in the calculation of GDP

On the other hand, the report showed increases in consumer spending, non-residential fixed investment and residential fixed investment.

A separate report from the Labor Department showed first-time claims for U.S. unemployment benefits edged slightly lower in the week ended April 23rd.

Treasuries remained firmly negative even as the Treasury Department revealed this month's auction of $44 billion worth of seven-year notes attracted above average demand.

The seven-year note auction drew a high yield of 2.908 percent and a bid-to-cover ratio of 2.41, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.32.

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

Looking ahead, trading on Friday may be impacted by reaction to reports on personal income and spending and consumer sentiment.

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