Treasuries Close Sharply Lower On Upbeat Economic Data

(RTTNews) - Treasuries moved sharply lower over the course of the trading day on Thursday on the heels of a batch of largely upbeat economic data.

Bond prices moved steadily lower throughout much of the session before accelerating to the downside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 13 basis points to 2.723 percent.

The ten-year yield more than offset the modest drop seen in the previous session, reaching its highest closing level in almost two years.

The substantial weakness among treasuries came as upbeat employment and manufacturing data added to recent expectations that the Federal Reserve will begin tapering its bond purchasing program at its next monetary policy meeting in September.

Early in the day, the Labor Department released a report showing that initial jobless claims unexpectedly fell to a five-year low in the week ended July 27th.

The report said initial jobless claims fell to 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The drop surprised economists, who had expected jobless claims to edge up to 345,000 from the 343,000 originally reported for the previous week.

With the unexpected decrease, initial jobless claims fell to their lowest level since hitting 321,000 in the week ended January 19, 2008.

The data generated some optimism about Friday's monthly jobs report, which could have a significant impact on the economic outlook.

A separate report from the Institute for Supply Management showed a bigger than expected increase by its index of U.S. manufacturing activity, which reached a two-year high.

The ISM said its purchasing managers index surged up 55.4 in July from 50.9 in June, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to climb to a reading of 53.1.

With the much bigger than expected increase, the ISM's manufacturing index rose to its highest level since reaching 55.8 in June of 2011.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing an unexpected drop in construction spending in June.

Trading on Friday is likely to be driven by reaction to the Labor Department's monthly job report, which is expected to show an increase of about 175,000 jobs in July.

The closely watched monthly jobs report is likely to overshadow two separate reports on personal income and spending and factory orders.