Treasuries continued their upward momentum on Wednesday, extending the gains observed in the prior session.
Following an early surge, treasuries maintained a firm positive stance throughout the day. Consequently, the yield on the benchmark ten-year note, which inversely correlates with its price, dropped by 7.6 basis points to settle at 3.768 percent.
The early rally in treasuries was spurred by a Labor Department report that revealed a larger-than-expected decline in U.S. job openings for July. According to the report, job openings decreased to 7.67 million in July from a downwardly revised 7.91 million in June.
Economists had anticipated jobless claims to fall to 8.10 million, slightly down from the originally reported 8.18 million for the previous month.
Nancy Vanden Houten, U.S. Lead Economist at Oxford Economics, commented, "The report provides further evidence of cooler labor market conditions but does not alter our expectation for the Federal Reserve to initiate interest rate normalization with a 25bp cut at the FOMC meeting on September 18."
She continued, "While the pace of hiring ticked up slightly, the increase in layoffs and other separations points to some downside risk in our forecast for August job growth of 170,000."
Additionally, the Commerce Department reported that the U.S. trade deficit widened to its largest level in over two years in July.
During the early session, the ten-year yield briefly traded above the two-year yield, effectively reversing the previously inverted yield curve, which is often a recession indicator.
Looking ahead, reports on jobless claims, private sector employment, and service sector activity are expected to draw attention on Thursday. However, trading activity might be somewhat restrained in anticipation of the more closely watched monthly jobs report set to be released on Friday.
