Treasuries Close Notably Higher Following Fed Announcement

(RTTNews) - After ending the previous session slightly higher, treasuries showed a strong move to the upside during trading on Wednesday.

Bond prices moved notably higher over the course of the trading day before closing firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.8 basis points to 1.515 percent.

The higher close by treasuries came after the Federal Reserve announced its widely expected decision to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.

The Fed's statement noted that information received since its June meeting indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate.

While the statement was largely unchanged from the previous meeting, the Fed did say near-term risks to the economic outlook have diminished.

The decision to leave rates unchanged was not unanimous, as Kansas City Fed President Esther George preferred to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Treasuries may also have benefited from the release of some disappointing U.S. economic data, including a Commerce Department report showing a much bigger than expected drop in durable goods orders in the month of June.

The report said durable goods orders tumbled by 4.0 percent in June following a revised 2.8 percent decrease in May.

Economists had expected durable goods orders to dip by 1.3 percent compared to the 2.2 percent decline originally reported for the previous month.

Excluding orders for transportation equipment, durable goods orders edged down by 0.5 percent in June after slipping by 0.4 percent in May. Ex-transportation orders had been expected to rise by 0.3 percent.

A separate report from the National Association of Realtors showed a much smaller than expected increase in pending home sales in the month of June.

NAR said its pending home sales index edged up by 0.2 percent to 111.0 in June after tumbling by 3.7 percent to 110.8 in May. Economists had expected the index to jump by 1.3 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Trading on Thursday may be impacted by reaction to the Labor Department's weekly jobless claims report as well as the results of the Treasury Department's auction of seven-year notes.