Treasuries' inability to maintain Wednesday's mild bounce, coupled with some firm economic data inspired a sharp downturn in prices on Thursday. The weak finish implies that there is risk to continue lower going into next week's FOMC meeting. This should leave the bears with ample opportunity to continue pressing the downside.
Treasuries weakened early following the release of the latest round of economic data. U.S. business inventories rose 0.2% in January after a 0.5% decline in December. Sales rose 1.1% from a flat reading in December. The inventory/sales ratio slipped to 1.38 from 1.39. The inventory figure is stronger than expected and could be the harbinger of the turnaround that has long been awaited.
Meanwhile, U.S. import prices fell 0.1% and were down 0.5% excluding petroleum. Export prices were down 0.2%, and were unchanged excluding agriculture. That is the eighth decline in import prices in the last nine months and reflects the strong dollar as well as the lack of demand for imported goods during the downturn in the economy. Petroleum prices were up 2.9% in February.
On the labor front, U.S. initial claims fell 3K in the week ended March 9 to a 377K level. The previous week's figure was revised to 380K from an originally reported 376K rise. This marks the tenth straight week that claims have held below the 400K level, and is consistent with a bottoming in the labor market. However, continuing claims jumped 96K to 3,479K, which somewhat tempers the initial claims figures.