Treasuries Retreat From Post-Fed Rally

Analysts attributed the downturn simply to profit-taking.
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Treasuries were lower this morning, giving back some of the two-day rally that followed the

Fed's

interest-rate hike Tuesday. Though two strong economic reports would support selling, analysts attributed the downturn to profit-taking after yesterday's surprising 1-point rally.

"Given the magnitude of the rally, there's a tendency for some to take profits," said Anthony Karydakis, senior financial economist at

Banc One Capital Markets

. "The market is holding up well overall."

Of late, the 30-year Treasury bond was down 16/32 to trade at 103 11/32, bumping the yield up by 4 basis points to 5.89%. The yield fell as low as 5.85% yesterday, one day after the Fed raised its target for the fed funds rate to 5.25% from 5%.

Initial jobless claims

fell to 283,000 last week from the previous week's 288,000 figure, the

Labor Department

reported this morning. The four-week moving average rose to 283,750 after the previous week's 281,500 figure. Weekly jobless claims remain near their all-time low, underscoring the tightness in the labor market. In July, the exceedingly low claims figures were a precursor to the stronger-than-expected July

employment report

. Total claims have continued to decline since last month, which could make the market nervous next week before Friday's release of the August

employment

report.

"Right after claims came out, we brushed it off and tried to push higher," said Karydakis. "Obviously, when an employment report is looming this is something that will make people cautious. People now believe the Fed is done for the year but the employment report will tell you otherwise."

Second-quarter

GDP

was revised downward to 1.8% from 2.3%, but this is a bit of a paradox -- the economy isn't slowing at all. GDP was revised lower because of downward revisions to business inventories and a widening in the trade deficit. Both of these were produced by exceedingly strong consumer demand -- businesses allowed inventories to run down as consumers bought goods heavily, and the trade gap widened because consumers continue to support the growth of exports to the U.S.