After moving notably lower over the two previous sessions, treasuries showed another significant move to the downside during trading on Thursday.
Bond prices showed a steep drop in early trading and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 11.1 basis points to 4.189 percent.
With the continued increase, the ten-year yield jumped to its highest closing level since early November 2022.
The extended slump by treasuries partly reflected continued concerns about U.S. debt after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating on Tuesday.
Fitch downgraded the U.S.’ long-term foreign-currency issuer default rating to AA+ from AAA, citing a “steady deterioration in standards of governance over the last 20 years.”
“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.
On the U.S. economic front, a report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended July 29th.
The Labor Department said initial jobless claims crept up to 227,000, an increase of 6,000 from the previous week’s unrevised level of 221,000. The uptick in jobless claims matched economist estimates.
The Institute for Supply Management also released a report showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of July.
The ISM said its services PMI slipped to 52.7 in July from 53.9 in June, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 53.0.
Trading on Friday is likely to be driven by reaction to the Labor Department’s closely watched monthly jobs report, which could impact the outlook for interest rates.
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