Treasuries Regain Ground Amid Global Economic Concerns

(RTTNews) - After trending lower over the past two weeks, treasuries regained some ground during trading on Thursday amid concerns about the outlook for the global economy.

Bond prices moved to the upside in early trading and remained firmly positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 4 basis points to 1.738 percent.

The ten-year yield closed lower for just the second time in nine sessions, pulling back off the four-month closing high set on Wednesday.

Treasuries benefited from their appeal as a safe haven, as disappointing Chinese trade data led to renewed worries about the global economy.

A report out of China showed that exports fell 10 percent year-over-year in September compared to expectations for a decrease of about 3 percent. Imports also fell by 1.9 percent, belying expectations for a 0.9 percent increase.

The Chinese trade surplus subsequently narrowed to $42 billion, smaller than the $53 billion surplus forecast by economists.

Julian Evans-Pritchard, China Economist at Capital Economics, said, "Overall, today's data are a reminder that China faces a challenging external environment which is likely to keep export growth subdued in coming quarters."

"Separately, the drop in imports could be an early sign that the recent recovery in economic activity is losing momentum," he added. "Nonetheless, we would caution against reading too much into a single data point given the volatility of the trade figures."

Treasuries saw continued strength following the release of the results of the Treasury Department's auction of $12 billion worth of thirty-year bonds, which attracted above average demand.

The thirty-year bond auction drew a high yield of 2.470 percent and a bid-to-cover ratio of 2.44, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.30.

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

On the U.S. economic front, the Labor Department released a report showing initial jobless claims at their lowest level in over forty years.

The Labor Department said initial jobless claims came in at 246,000 in the week ended October 8th, unchanged from the previous week's revised level. Economists had expected jobless claims to climb to 254,000.

With the downward revision to the figure for the previous week, jobless claims held at their lowest levels since November of 1973.

Reports on retail sales and producer prices are likely to attract attention on Friday, as the data may impact the outlook for monetary policy.