By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) — Treasurys gained on Thursday, pushing yields lower in a reversal from Wednesday, as investors considered U.S. economic reports.
Initial jobless claims for the week ended March 16 edged higher to a seasonally adjusted 336,000, beating economist expectations and remaining near a five-year low.
U.S. home prices climbed 0.6% on a seasonally adjusted basis in January, an increase of 6.5% from the year-ago period.
Existing home sales increased 0.8% in February and the Philadelphia Federal Reserve’s business-conditions index posted a better-than-expected rise to 2%, indicating business expansion.
Yields on the benchmark 10-year U.S. Treasury note 10_YEAR -1.48% fell 2 basis points to 1.93%.
Yields on the 30-year U.S. bond 30_YEAR -1.16% fell 3 basis points to 3.16% and yields on the five-year note 5_YEAR -2.58% fell 2 points to 0.787%.
Federal Reserve Chairman Ben Bernanke said Wednesday the central bank would maintain quantitative easing until it sees sustained gains in the labor market, reaffirming his view about the bond-buying program’s benefits. While he acknowledged recent improvements, he emphasized the need to make sure recent job gains weren’t just a short-term quirk.
The central bank currently purchases $85 billion in Treasury and mortgage debt per month and has linked the length of its bond-buying program to a substantial improvement in the labor market. The monthly asset purchases will continue unchanged, Bernanke said Wednesday.
Bernanke’s remarks on quantitative easing, which came after the Federal Open Market Committee debated the associated risks and costs in its March meeting, aren’t surprising because any suggestion about slowing asset purchases could lead to market reaction.
“As soon as he talks like that’s a possibility in the near term, then the market will do it for him and he’ll lose all flexibility. He has to talk confidently right until the moment they’re ready to stop,” said Tom Graff, a fixed-income portfolio manager at Brown Advisory.
Uncertainty in Cyprus persisted as the European Central Bank set a Monday deadline for the country to reach an agreement on a bailout package. After rejecting the rescue program including the controversial deposit tax on Tuesday, Cyprus needs to find about 5.8 billion euros ($7.5 billion) in order to receive the €10 billion bailout from the European Union and International Monetary Fund. Without an agreement by Monday, the ECB said Thursday it would suspend liquidity.
The Cypriot bank deposit tax sparked a flight to safety earlier this week, and without a deal by Monday, the country risks a banking-system collapse or an exit from the euro-zone.
“Cyprus obviously is going to matter a lot,” said Graff.
Saumya Vaishampayan is a MarketWatch reporter based in New York. You can find her on Twitter @saumvaish.
