FX.co ★ Treasuries Recover From Early Weakness To Close Modestly Higher

U.S. Treasury bonds made a significant recovery over the course of the business day on Thursday. Although they began the day in a weak position, they slowly climbed into the black as the day went on. As a result, the yield on the benchmark ten-year note dipped 2.4 basis points to 4.571 percent, down from its peak of 4.651 percent.

This recovery in treasuries was seen as traders processed the Federal Reserve's latest monetary policy update, given on Wednesday. Concerns have been expressed recently that the Fed's next move could be to raise interest rates rather than to cut them. However, Fed Chair, Jerome Powell's remarks after the meeting seemed to alleviate these worries.

Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, elaborated by explaining that Powell was decidedly refusing to present a hawkish outlook at his press conference. Instead, he repeatedly highlighted the positive side of data, ranging from higher-than-predicted inflation to the recent downturn in economic growth expectations. Remarkably, Powell dispelled any notion that the Fed was transitioning from interest rate cuts to hikes.

Early in the day, treasuries were affected negatively by a batch of U.S. economic data. This included a report by the Labor Department which highlighted a significant increase in labor costs for the first quarter of 2024. This report showed a rise in unit labor costs by 4.7 percent, following an unchanged reading from the last quarter.

Economists had predicted an increase in labor costs by 3.2 percent, contrasting the 0.4 percent raise noted in the previous quarter. Commenting on the data, Oren Klachkin, a Nationwide Financial Markets Economist, stated that despite no significant productivity growth to offset the wage hike, the surge in unit labor costs indicates consistent inflation pressure.

Separate reports from the Labor Department showed unchanged initial jobless claims last week and a slight narrowing in the U.S. trade deficit for March from the Commerce Department. Market attention is likely to be focused on the Labor Department's monthly jobs report on Friday, alongside a report on service sector activity.