Treasuries Come Under Pressure After Initial Move To The Upside

After showing an initial move to the upside, treasuries came under pressure over the course of the trading session on Friday.

Bond prices pulled back well off their early highs and slid firmly into negative territory going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.7 basis points to 3.804 percent.

The ten-year yield further offset the steep drop seen on Wednesday but remains well off Tuesday’s twelve-year highs.

The pullback by treasuries came as traders reacted to the latest U.S. economic data, including a Commerce Department report on personal income and spending that includes a reading on inflation said to be preferred by the Federal Reserve.

The report showed the annual rate of core consumer price growth accelerated to 4.9 percent in August from a revised 4.7 percent in July.

Economists had expected the annual rate of growth in core consumer prices, which exclude food and energy prices, to tick up to 4.7 percent from the 4.6 percent originally reported for the previous month.

Meanwhile, the University of Michigan released a separate report showing one-year inflation expectations edged down to 4.7 percent in September from 4.8 percent in August, hitting the lowest level since last September.

Five-year inflation expectations also dipped to 2.7 percent in September from 2.9 percent in August, falling below the 2.9-3.1 percent range for the first time since July 2021.

“Inflation expectations are likely to remain relatively unstable in the months ahead, as consumer uncertainty over these expectations remained high and is unlikely to wane in the face of continued global pressures on inflation,” said Hsu.

MNI Indicators also released a report showing an unexpected contraction in Chicago-area business activity in the month of September.

MNI Indicators said its Chicago business barometer slumped to 45.7 in September from 52.2 in August, with a reading below 50 indicating contraction. Economists had expected the business barometer to edge down to 51.8.

With the much bigger than expected decrease, the Chicago business barometer entered contraction territory for the first time since June 2020.

The Labor Department’s monthly jobs report is likely to be in the spotlight next week, although traders are also likely to keep an eye on reports on manufacturing and service sector activity.

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