After seeing early weakness, treasuries staged a recovery over the course of the trading session on Wednesday and managed to close slightly higher.
Bond prices moved to the upside in the final hour of trading. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by nearly a basis point to 1.954 percent after reaching a high of 2.008 percent.
With the slight drop on the day, the ten-year yield extended its recent downward trend, once again ending the session at its lowest closing level in well over a year.
The early weakness among treasuries was partly due to the release of a report from payroll processor ADP showing stronger than expected private sector job growth in the month of December.
ADP said the private sector added 241,000 jobs in December following an upwardly revised increase of 227,000 jobs in November. Economists had expected an increase of about 235,000 jobs.
Jay Morelock, an economist at FTN Financial, said, “The ADP print was a relief, with some fearing it would fall below 200,000 due to oil price disruptions.”
Nonetheless, traders seemed reluctant to sell U.S. bonds amid continued concerns about overseas economies, leading to the subsequent rebound.
Bond traders also seemed to respond positively to the release of the minutes of the Federal Reserve’s December monetary policy meeting.
The minutes of Fed meeting suggested that some members were concerned that a further deterioration in the foreign economic situation could result in slower domestic economic growth than currently expected.
At the same time, the minutes indicated that the Fed might begin policy normalization at a time when core inflation is still near current levels.
Peter Boockvar, managing director at the Lindsey Group, said, “Bottom line, as always the minutes are all over the place in trying to reveal everyone’s opinions about everything. In terms of when the Fed may hike rates and what would be the trigger, we learned nothing new.”
Following today’s upbeat ADP report, trading on Thursday could be impacted by reaction to the weekly jobless claims data, although activity may be somewhat subdued ahead of the release of the monthly jobs report on Friday.
The material has been provided by InstaForex Company – www.instaforex.com