Treasuries broke their losing streak and closed higher Wednesday, overcoming a rise in core CPI, a spate of non-government debt issues coming to market and a resilient Nasdaq. The yield curve steepened on the session, as the front-end outperformed.
On Thursday's data calendar, the May Philly Fed index is expected at 12.0, which would represent little change from the 12.3 reading seen in April. Such a figure would suggest this region's manufacturing sector continues to improve from the trough seen immediately following the September 11 terrorist attacks, and would support the view that similar trends are holding for the broader factory sector. Any improvement in the headline figure will pressure Treasuries.
Also, S&P MMS expects housing starts to slip 1.6% in April to a 1.62 million unit annual pace. Housing permits are anticipated to decline 1.5% to a 1.61 mln unit rate during the month. Treasuries may knee-jerk higher on the drop, but reaction will be limited ahead of the Philly Fed data.
Meanwhile, MMS expects initial claims to fall 6K to 405K for the week ended May 11. A figure in line with expectations would mark the fourth consecutive week that initial claims have moderated after surging late-March/early-April due to distortions tied to the extension of jobless benefits. While the small drop is negative for bonds, the change is small and leaves the level above the key 400K level.