Treasuries Advance on Fed's Gloomy Outlook

Rising new jobless claims also gave bonds a shot in the arm

Prices at the long-end of the Treasury curve were bulled up by the combination of a $1.75 billion bond buyback and another downcast glimpse into Fed thinking on the economy via the June FOMC minutes.

On the data front, jobless claims reverted to their higher trend at +393,000 after all the auto re-tooling of the past couple months, with continuing claims rising to the highest level since September 1992.

The September bond bumped along below 105-11 Aug-17 highs, with modest profit-taking after the buyback. But the dour FOMC minutes sent stocks into retreat, boosted the contract to 105-18 five-month highs and sent the two-year note and 30-year note curve back below +170 basis points, compared to wides above +180 basis points right after the FOMC.

The front-end lagged after the minutes revealed St. Louis Fed's Poole dissenting from the both cut and the weaker bias, while "a number of members" believed the Fed to be near the end of its cycle. Overall the report suggested the Fed was still grappling with an evolving slowdown. Dallas Fed's McTeer fretted about the "fringes of the labor force," and manufacturers pressed for a weaker dollar again.

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