After seeing some weakness earlier in the session, treasuries showed a notable turnaround over the course of the trading day on Thursday. Strong demand for an auction of seven-year notes helped to drive treasuries firmly into positive territory.
The benchmark ten-year note moved off its high for the session going into the close but still managed to end the session notably higher. Subsequently, the yield on the ten-year note closed down 3.9 basis points at 2.733 percent.
The strength among treasuries came as the results of the Treasury Department's auction of $24 billion worth of seven-year notes helped to ease some of the recent concerns about the outlook for demand for government debt.
The seven-year note auction drew a yield of 2.384 percent and a bid-to-cover ratio of 2.52. The bid-to-cover ratio, an indicator of demand, came in well above the 2.11 reported for the previous auction of $22 billion worth of seven-year notes last month.
Following a strong two-year note auction on Tuesday, relatively weak demand for a five-year note auction yesterday combined with a failed 40-year gilt auction in the U.K. raised some concerns about the risks faced by heavily indebted, money printing countries.
On Wednesday, the Treasury Department's auction of $34 billion worth of five-year notes drew a higher than expected yield of 1.849 percent and a bid-to-cover ratio of 2.02. The bid-to-cover ratio came in well below the 2.21 from the previous auction of five-year notes.
Earlier in the day, the U.K. Debt Management Office had said investors bid for 1.63 billion pounds of the 40-year gilts compared to the 1.75 billion pounds offered.
The bond market weakness seen earlier on Thursday came as traders digested some economic reports that suggested some stabilization.
While the Commerce Department's final report on fourth quarter gross domestic product showed that the economy contracted a little faster than previously estimated, the revised drop in GDP was not quite as steep as economists had been expecting.
The report released on Thursday showed that GDP fell by a revised 6.3 percent in the fourth quarter compared to the preliminary estimate of a 6.2 percent decrease. Economists had been expecting GDP to be revised to show a somewhat steeper 6.6 percent contraction.
With the downward revision, the contraction in the fourth quarter still marked the weakest quarter since a 6.4 percent decrease in GDP in the first quarter of 1982. However, with only a week left in the first quarter, the data was largely viewed as old news.
In other economic news, the Labor Department said that initial jobless claims in the week ended March 21st rose to 652,000 from the previous week's revised figure of 644,000. Economists had expected claims to rise to 650,000 from the 646,000 originally reported for the previous week.
While the jobless claims data indicates continued weakness in the labor market, it suggests that the employment situation is stabilizing rather than showing a continued deterioration.
Trading on Friday could be impacted by the release of the Commerce Department's report on personal income and spending in the month of February along with the Reuters/University of Michigan's revised reading on consumer sentiment in the month of March.
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