Treasuries Extend Recent Upward Trend

(RTTNews) - Extending the upward trend seen over the past few sessions, treasuries moved moderately higher during trading on Thursday.

Bond prices moved to the upside in early trading and remained in positive territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 2.642 percent.

The strength among treasuries came as traders digest Federal Reserve Chair Janet Yellen's testimony before the Senate Banking Committee.

While the tone of Yellen's testimony was little changed from her remarks before the House Financial Services Committee earlier this month, she acknowledged the economic impact of the severe winter weather.

Yellen said it was too soon to know how much the weather has played a role in this winter's economic lull but said the Fed will consider the issue at its March meeting.

On the economic front, the Commerce Department released a report showing a drop in durable goods orders in the month of January.

The report said durable goods orders fell by 1.0 percent in January after tumbling by a revised 5.3 percent in December. Economists had expected orders to drop by about 1.6 percent.

However, excluding a notable decrease in orders for transportation equipment, durable goods orders actually rose by 1.1 percent in January compared to a 1.9 percent drop in December.

The increase in orders excluding transportation came as a surprise to economists, who had expected a modest decrease of about 0.4 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Overall, there is some evidence that the growth rate of equipment investment is strengthening but, as with much of the other activity and employment data, we won't know for sure until the weather improves."

Meanwhile, the Labor Department released a separate report showing that initial jobless claims came in above economist estimates in the week ended February 22nd.

The report said initial jobless claims rose to 348,000, an increase of 14,000 from the previous week's revised figure of 334,000. Economists had been expecting jobless claims to edge down to 335,000 from the 336,000 originally reported for the previous week.

Treasuries saw continued strength following the release of the results of the Treasury Department's auction of $29 billion worth of seven-year notes, which attracted above average demand.

The seven-year note auction drew a high yield of 2.105 percent and a bid-to-cover ratio of 2.72, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.56.

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

Peter Boockvar, managing director at the Lindsey Group, said, "The seven-year note auction was very good, capping a solid week for the U.S. Treasury in placing its debt."

Trading on Friday may be impacted by the release of a batch of U.S. economic data, including reports on fourth quarter GDP, pending home sales, and Chicago-area business activity.