Treasuries Close Firmly Positive Following Fed Announcement

Treasuries moved notable higher over the course of the trading day on Wednesday, shrugging off news of further tapering by the Federal Reserve.

Bond prices moved moderately higher in morning trading and saw some further upside following the Fed announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.7 basis points to 2.648 percent.

The strength among treasuries came as the Fed’s decision to scale back its asset purchase program by another $10 billion was widely anticipated.

The Fed reduced the pace of its asset purchases to $45 billion a month and suggested that it is likely to continue tapering the program in measured steps at future meetings.

At the same time, the central bank reiterated that it is likely to keep interest rates at near-zero levels for a considerable time after the asset purchase program ends.

Most of the statement was identical to the one released following the March meeting, although the Fed noted that growth in economic activity has picked up recently after having slowed sharply in the winter due to adverse weather conditions.

On the economic front, the Commerce Department released a report early in the day showing only a modest uptick in U.S. economic activity in the first three months of the year.

The report said GDP inched up by just 0.1 percent in the first quarter of 2014 compared to the 2.6 percent growth seen in the fourth quarter of 2013.

While the severe winter weather had been expected to contribute to a notable slowdown in the pace of GDP growth, economists had still been calling for an increase of about 1.2 percent.

Meanwhile, payroll processor ADP released a separate report showing stronger than expected private sector job growth in the month of April.

ADP said private sector employment surged up by 220,000 jobs in April compared to economist estimates for an increase of about 210,000 jobs.

The report also showed notable upward revisions to the job growth in the two previous months, with private sector employment jumping by 209,000 jobs in March and 193,000 jobs in February.

Trading on Thursday may be impacted by the release of a slew of economic data, including reports on weekly jobless claims, personal income and spending, and national manufacturing activity.

However, reaction to the data may be somewhat subdued as traders look ahead to the release of the more closely watched monthly jobs report on Friday.

Published: 2014-04-30 20:48:00 UTC+00

Treasuries Close Firmly Positive Following Fed Announcement