Treasuries dropped Thursday, snapping two days of gains, as investors continued to move capital into the stock market. The resurgence of risk appetite came as traders considered a strong earnings forecast from a major bank, which raised prospects in the beleaguered financial sector.
Investors also drew direction from latest batch of economic reports, which offered some silver lining for the labor sector. In addition, trade data showed an unexpected contraction in the U.S. trade deficit, helped by a rise in exports.
An auction of 10-year notes drew strong demand, helping to give some support to treasuries. Shortly afterward, however, the market resumed its downward move, though it moderated a bit before the close.
The yield on the 10-year note, which moves in the opposite direction as its price, closed at 2.926 percent, an increase of 7.9 basis points of on the session.
With the decline, treasuries closed out the week lower, testing its lowest level since mid-March before trimming losses before the close. The yield on the ten-year note gained 1.9 basis points since last Friday's close.
The bond market is closed on Friday for the Good Friday holiday.
At the close of the bond market, stocks continued to show strength, with the blue chip index up more than 180 points. Equities surged after Wells Fargo announced that it would post first-quarter profit of $3 billion, a figure that blew away analyst estimates. The news eased some concern about the health of the financial sector, which has been the center of the economic storm that has rocked global markets since last fall.
The government sold $18.0 billion worth of 10-year notes in an auction Thursday, drawing a high yield of 2.950 percent. The sale attracted a relatively strong demand, with the bid-to-cover ratio coming in at a level of 2.49.
The auction results showed increased demand compared to last month, when the Treasury also sold $18.0 billion worth of the securities. The auction in March drew a high yield of 3.681 percent, with the bid-to-cover ratio of 2.14.
On the economic front, the Labor Department said jobless claims fell to 654,000 from the previous week's revised figure of 674,000. Economists had expected jobless claims to edge down to 660,000 from the 669,000 originally reported for the previous week.
Meanwhile, a report from the Commerce Department showed that the U.S. trade deficit narrowed to $25.97 billion in February, from the previous month's shortfall of $36.2 billion.
A third report released during the morning indicated that import prices rose 0.5 percent in March following a revised 0.1 percent decrease in February. The increase in import prices marks the first price growth in eight months.
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