Treasuries Finish Lower
A mere 4,000 decline in initial jobless claims to 384,000 was sufficient to knock an overbought Treasuries for a loop Thursday. Indeed, even though few expect any significant changes monetary policy at next Tuesday's FOMC meeting, signs of even modest improvement in the labor market was excuse enough to take profits.
Treasuries actually started the day on good footing, helped by weakness in stocks on the heels of a 5% plunge in the Nikkei, a Washington Post article indicating the Fed will remain on hold, as well as hopes for a soft initial claims report.
Talk had been circulating through the market that claims could rise back to the 400,000 area. The post-data selling pressure met with little resistance and easily overcame some of the safe-haven demand out of stocks. And once stocks began to stabilize and recover into the afternoon, the long bond pierced several layers of support before bottoming just shy of 5.25%. Spread product also added to the pressure on Treasuries Thursday, as the Federal Home Loan Bank, Citigroup, and others added to the recent list of offerings.
Curve steepening trades also weighed heavily on the bond, the underperformer on the day. The 2-year notes and 30-year bond spread widened out nearly 4 basis points to +340 basis points.
There are no significant data or events Friday. The highlight is comments from Fed Governor Bernanke, but he is widely expected to steer clear of monetary policy as he speaks at the Milton/Rose Friedman conference. Next week's lineup is sure to stir the market, however. The Treasury's 2-year note announcement will take center stage Monday, while the FOMC steals the spotlight on Tuesday.
On the data front, the docket kicks off with home sales on Monday, durables and consumer confidence are slated for Tuesday, and claims and GDP highlight Thursday. Next week finishes on a high note with personal income, consumer sentiment, and Chicago PMI data.
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