Treasuries Close Firmly Positive After Seeing Early Weakness

(RTTNews) - After initially moving to the downside, treasuries showed a notable turnaround over the course of the trading day on Friday.

Bond prices climbed well off their early lows to end the day firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 2.7 basis points to 2.32 percent.

Treasuries initially reacted negatively to a batch of upbeat economic data, including a report from the Commerce Department showing a slightly bigger than expected increase in retail sales in October.

The report said retail sales rose by 0.3 percent in October, offsetting the 0.3 percent drop seen in September. Economists had expected sales to edge up by 0.2 percent.

Paul Diggle, an economist at Capital Economics, said the retail sales data suggests that fourth quarter consumption growth could be in the region of 2.5 percent annualized.

Additionally, Reuters and the University of Michigan released a separate report showing a sharp jump in consumer sentiment in November.

The report showed that the preliminary reading on the consumer sentiment index for November came in at 89.4 compared to the final October reading of 86.9. The increase lifted the index to a seven-year high.

While the data generated some concerns about the outlook for interest rates, traders seemed to shrug off those worries due in part to tame inflation data.

A report from the Labor Department showed a notable decrease in import prices in October, with falling fuel prices leading the way lower.

The Labor Department said its import price index tumbled by 1.3 percent in October after falling by a revised 0.6 percent in September.

The turnaround by treasuries also reflected the appeal of U.S.-government backed debt amid lingering concerns about the global economic outlook.

Housing and inflation data is likely to be in focus next week along with the minutes of the latest Federal Reserve meeting, which could shed some light on the outlook for monetary policy.