Treasuries Move Back To The Downside Following Powell Comments

Treasuries turned in a lackluster performance for much of the trading session on Thursday but came under pressure in the latter part of the day.

Bond prices pulled back firmly into negative territory before moving roughly sideways going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.1 basis points to 1.129 percent.

The afternoon weakness among treasuries was partly due to remarks by Federal Reserve Chair Jerome Powell during a virtual event hosted by Princeton University.

In wide-ranging remarks, Powell suggested that the economy could return to pre-pandemic levels sooner than feared due to unprecedented fiscal stimulus and the Fed’s aggressive intervention.

“The thing that we’re most focused on is getting back to a strong labor market quickly enough that people’s lives can get back to where they want to be,” Powell said.

He added, “We were in a good place in February of 2020, and we think we can get back there, I would say, much sooner than we had feared.”

Despite the optimistic comments, Powell said the Fed does not intend to raise interest rate anytime soon and downplayed talk of the central bank tapering its bond purchases in the near future.

The lower close by treasuries also came as traders waited for President-elect Joe Biden to unveil a major coronavirus relief package.

A report from CNN citing two people briefed on the deliberations said the price tag for the package is expected to be in the ballpark of $2 trillion.

The package is expected to include an increase in direct payments to Americans as well as an extension of expanded unemployment insurance and support for state and local governments.

Meanwhile, traders largely shrugged off a report from the Labor Department showing initial jobless claims jumped to their highest level in over four months in the week ended January 9th.

The report said initial jobless claims rose to 965,000, an increase of 181,000 from the previous week’s revised level of 784,000.

Economists had expected jobless claims to inch up to 795,000 from the 787,000 originally reported for the previous week.

With the bigger than expected increase, jobless claims reached their highest level since hitting 1.011 million in the week ended August 22nd.

Trading on Friday may be impacted by reaction to a slew of U.S. economic data, including reports on retail sales, industrial production and consumer sentiment.

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