Treasuries Extend Recovery From Recent Lows

Treasuries moved notably higher during trading on Friday, extending the upward move seen over the two previous sessions.

Bond prices pulled back off their best levels in afternoon trading but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell 6.8 basis points to 3.294 percent.

The ten-year yield moved lower for the third straight session after ending Tuesday’s trading at its highest closing level in well over three years.

Traders seemed to pick up treasuries at reduced levels following the Federal Reserve’s 75 basis point interest rate hike on Wednesday.

While the Fed is expected to continue raising interest rates in the coming months, traders may see treasuries as a safe haven amid concerns about a potential recession.

In U.S. economic news, the Federal Reserve released a report showing industrial production increased by less than expected in the month of May,

The Fed said industrial production crept up by 0.2 percent in May after surging by an upwardly revised 1.4 percent in April.

Economists had expected production to rise by 0.4 percent compared to the 1.1 percent jump originally reported for the previous month.

“The muted 0.2% m/m rise in industrial production in May adds to the evidence that the economy is slowing,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, “But there is still little in activity data to suggest a recession is on the horizon, or to dissuade the Fed from pressing ahead with more aggressive policy tightening.”

A separate report from the Conference Board showed a continued decrease by its reading on leading U.S. economic indicators in the month of May.

The report showed the Conference Board’s leading economic index fell by 0.4 percent in May, matching the revised drop seen in April as well as economist estimates.

“The US LEI fell again in May, fueled by tumbling stock prices, a slowdown in housing construction, and gloomier consumer expectations,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.

He added, “The index is still near a historic high, but the US LEI suggests weaker economic activity is likely in the near term—and tighter monetary policy is poised to dampen economic growth even further.”

Following a very busy week on the U.S. economic front, the economic calendar for next week is relatively quiet.

Traders are still likely to keep an eye on Congressional testimony by Fed Chair Jerome Powell as well as reports on new and existing home sales.

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