Treasuries Close Roughly Flat For Second Straight Day

For the second consecutive session, treasuries pulled back near the unchanged line over the course of the trading day on Thursday after seeing initial strength.

Bond prices saw modest strength for much of the morning but gave back ground in afternoon trading. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.124 percent after hitting a low of 2.092 percent.

The late-day pullback by treasuries was partly due to a report from Bloomberg News indicating the U.S. is considering delaying President Donald Trump’s threatened tariffs on Mexico.

A person familiar with the matter told Bloomberg that Mexico is pushing for more time to negotiate amid concerns the two sides won’t reach an agreement on all the steps Mexico needs to take to stop the flow of migrants before a Monday deadline.

Bloomberg was told by a U.S. official that the most likely outcome is still that a 5 percent tariff goes into effect but that the duties could be short-lived if Mexico follows through on its promises.

Earlier in the session, treasuries benefited from their appeal as a safe haven amid uncertainty ahead of the release of the Labor Department’s monthly jobs report on Friday.

The report is expected to show employment increased by 185,000 jobs in May after surging up by 263,000 jobs in April, while the unemployment rate is expected to hold at 3.6 percent.

The strength of the jobs data could have a notable impact on the perceived prospects for a near-term interest rate cut by the Federal Reserve.

A day ahead of the release of the more closely watched monthly report, the Labor Department released a report showing first-time claims for U.S. unemployment benefits came in unchanged in the week ended June 1st.

The report said initial jobless claims came in at 218,000, unchanged from the previous week’s revised level. Economists had expected jobless claims to come in unchanged compared to the 215,000 originally reported for the previous week.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed in the month of April.

The Commerce Department said the trade deficit narrowed to $50.8 billion in April from a revised $51.9 billion in March. Economists had expected the deficit to widen to $50.7 billion from the $50.0 billion originally reported for the previous month.

The narrower deficit came as the value of imports fell by $5.7 billion or 2.2 percent to $257.6 billion, while the value of exports dropped by $4.6 billion or 2.2 percent to $206.8 billion.

The monthly jobs report is likely to be the spotlight on Friday, although traders are also likely to keep a close eye out for any developments on the trade front.

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