Bernanke Comments Lead To Notable Rebound By Treasuries

(RTTNews) - After seeing a notable pullback late in the previous session, treasuries showed a strong move back to the upside during trading on Thursday.

Bond prices moved sharply higher in early trading and remained firmly positive throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.6 basis points to 2.574 percent.

With the drop, the ten-year yield more than offset the 5 basis point gain posted on Wednesday, pulling back further off last Friday's nearly two-year highs.

The rebound by treasuries was largely due to a positive reaction to comments from Federal Reserve Chairman Ben Bernanke.

Answering questions following a speech at a conference sponsored by the National Bureau of Economic Research, Bernanke indicated that highly accommodative monetary policy will be in place for the foreseeable future.

Bernanke also noted that there would not be an automatic increase in interest rates when the U.S. unemployment hits the Fed's target of 6.5 percent

Fed officials have recently stressed that monetary policy will remain highly accommodative even as the central bank begins to scale back its asset purchase program.

On the economic front, the Labor Department released a report showing an unexpected increase in initial jobless claims in the week ended July 6th.

The report said initial jobless claims rose to 360,000, an increase of 16,000 from the previous week's revised figure of 344,000. The increase surprised economists, who had been expecting jobless claims to dip to 340,000 from the 343,000 originally reported for the previous week.

A separate report from the Labor Department showed an unexpected decrease in import prices in the month of June, with a drop in non-fuel prices more than offsetting a modest increase in fuel prices.

Meanwhile, the Treasury Department sold $13 billion worth of thirty-year bonds, attracting below average demand.

The thirty-year bond auction drew a high yield of 3.66 percent and a bid-to-cover ratio of 2.26, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.59.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Trading on Friday may be impacted by the release of reports on producer prices and consumer sentiment as well as comments by several Fed officials.