Treasuries Move Notably Higher Amid Weakness On Wall Street

(RTTNews) - Following the modest pullback seen in the previous session, treasuries moved back to the upside during trading on Friday.

Bond prices moved steadily higher for much of the session before closing firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.2 basis points to 1.705 percent.

The ten-year yield more than offset the modest uptick seen in the previous session, falling to its lowest closing level in over a month.

Treasuries benefited from their appeal as a safe haven, as stocks came under pressure as the day progressed after initially showing a lack of direction.

A decrease by the price of crude oil may also have increased demand for treasuries, with crude for June delivery sliding $0.49 to $46.21 a barrel.

The higher close by treasuries also came following the release of a Commerce Department report showing much stronger than expected retail sales growth in the month of April.

The Commerce Department said retail sales surged up by 1.3 percent in April after slipping by 0.3 percent in March. Economists had expected sales to climb by 0.9 percent.

Excluding a jump in auto sales, retail sales still rose by 0.8 percent in April compared to an upwardly revised 0.4 percent increase in March. Ex-auto sales had been expected to rise by 0.5 percent.

A separate report from the University of Michigan also showed that consumer sentiment jumped to an eleven-month high in May.

The reports generated some optimism about the economic outlook, although the data also led to speculation about the possibility of an interest rate hike next month.

In response to the retail sales data, Steve Murphy, U.S. economist at Capital Economics, said a June rate hike by the Federal Reserve is a toss-up.

"The activity data certainly warrants a hike, but separately we are becoming worried that May's employment figures could be pulled down by a couple of big temporary factors," Murphy said.

He added, "Given how cautious the Yellen-led Fed has shown itself to be, the decision next month could go either way."

While the economic calendar for this past week was relatively quiet, next week's trading may be impacted by reaction to reports on consumer prices, housing starts, industrial production, and existing home sales.

The Fed is also scheduled to release the minutes of its latest monetary policy meeting, which could shed some light on the outlook for interest rates.