Treasuries Close Modestly Higher After Seeing Early Weakness

(RTTNews) - After coming under pressure in early trading on Friday, treasuries showed a significant turnaround and managed to end the day modestly higher.

Bond prices bounced well off their lows in morning trading before creeping above the unchanged line in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 2.591 percent after reaching a high of 2.70 percent.

With the drop, the ten-year yield added to the losses posted in the two previous sessions, falling to a three-month closing low.

The early weakness among treasuries was largely due to the release of a report from the Labor Department showing stronger than expected job growth and a steep drop in the unemployment rate.

The Labor Department said non-farm payroll employment surged up by 288,000 jobs in April compared to economist estimates for an increase of about 218,000 jobs.

With the stronger than expected job growth, the unemployment rate dropped to 6.3 percent in April from 6.7 percent in March. Economists had expected the unemployment rate to edge down to 6.6 percent.

The drop pulled the unemployment rate down to its lowest level since September of 2008, although the decrease partly reflected a notably smaller labor force.

The job growth generated some positive sentiment regarding the economy and led to speculation that the Federal Reserve might scale back its asset purchases at a faster pace.

Economists largely shrugged off those concerns, however, and treasuries showed a strong move back to the upside amid renewed worries about escalating tensions in Ukraine.

Pro-Russian militants in eastern Ukraine reportedly shot down two helicopters as Ukrainian security forces attempted to retake control of the city of Slavyansk.

Several militants and two civilians were also reportedly killed during the "anti-terrorist" operation, leading Russian President Vladimir Putin to declare that the international agreement reached last month in Geneva had collapsed.

Later in the day, President Barack Obama and German Chancellor Angela Merkel stated that Russia will face further sanctions if its actions disrupt Ukraine's presidential elections scheduled for later this month.

Concerns about an escalation of the conflict over the weekend led some traders to look for safe havens such as bonds.

Following the slew of key U.S. economic data released over the past week, the economic calendar for next week is relatively quiet.

Nonetheless, traders are likely to keep an eye on reports on service sector activity, international trade, and labor productivity as well as two days of Congressional testimony from Fed Chair Janet Yellen.