Treasuries Move Back To The Upside After Yesterday's Pullback

Following the notable pullback seen in the previous session, stocks moved back to the upside during trading on Wednesday.

Bond prices moved higher early in the session and remained mostly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.8 basis points to 2.447 percent.

The higher close by treasuries came after the Federal Reserve released the minutes of its latest monetary policy meeting.

The minutes of the December meeting showed most participants reiterated their support for continuing a gradual approach to raising interest rates.

Almost all participants agreed with the decision to raise rates by 25 basis points at the meeting, although a couple wanted to leave rates unchanged until the actual rate of inflation had moved further toward the Fed’s 2 percent longer-run objective.

While low inflation is seen as transitory, some Fed members were concerned “that inflation might stay below the objective for longer than they currently expected.”

Meanwhile, the Fed said it raised its economic projections due to the massive tax reform bill passed by Republicans and signed by President Donald Trump.

“Overall, Fed officials re-affirmed at this meeting that they anticipate raising interest rates three times in 2018, matching the tightening in 2017,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, “But we still anticipate that a slightly faster than expected rebound in core inflation will mean we eventually see four rate hikes in 2018.”

On the U.S. economic front, a report released by the Institute for Supply Management showed growth in manufacturing activity unexpectedly accelerated in the month of December.

The ISM said its purchasing managers index rose to 59.7 in December from 58.2 in November, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to edge down to 58.1.

“This indicates growth in manufacturing for the 16th consecutive month, led by strong expansion in new orders and production,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

A separate report from the Commerce Department showed a bigger than expected increase in construction spending in the month of November.

The Commerce Department said construction spending climbed by 0.8 percent to an annual rate of $1.257 trillion in November from a revised $1.247 trillion in October. Economists had expected spending to rise by 0.5 percent.

Trading on Thursday may be impacted by reaction to reports on private sector employment and weekly jobless claims, although activity may be subdued ahead of the release of the Labor Department’s more closely watched monthly jobs report on Friday.

The material has been provided by InstaForex Company – www.instaforex.com