After trending higher over the past few sessions, treasuries showed a lack of direction over the course of the trading day on Friday.
Bond prices spent the day bouncing back and forth across the unchanged line before closing nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.589 percent.
Treasuries initially move to the downside as traders cashed in on recent strength after the ten-year yield ended Thursday’s trading at a three-month closing low.
However, traders seemed reluctant to abandon the safe haven of bonds amid concerns about rising tensions between the U.S. and China after Beijing decided to revoke the license for the establishment and operation of the U.S. Consulate General in Chengdu.
The move came just days after the U.S. government ordered China to close its consulate in Houston, Texas, amid accusations Chinese diplomats aided in economic espionage and the attempted theft of scientific research.
A statement from China’s Foreign Ministry claimed the move by the U.S. violated international law and seriously damaged U.S.-China relations and called the closure of the U.S. consulate in Chengdu a “legitimate and necessary response to the unreasonable actions of the United States.”
“The current situation between China and the United States is something China does not want to see, and the responsibility rests entirely with the United States,” the statement said, urging the U.S. to immediately revoke the “erroneous decision.”
Worries about the continued spike in coronavirus cases in the U.S. also continued to contribute to the appeal of safe havens such as bonds.
While treasuries bounced back near the unchanged line, buying interest remained subdued following the release of a Commerce Department report showing new home sales in the U.S. continued to spike in the month of June.
The Commerce Department said new home sales soared by 13.8 percent to an annual rate of 776,000 in June after skyrocketing by 19.4 percent to a revised rate of 682,000 in May.
Economists had expected new home sales to jump 3.6 percent to a rate of 700,000 from the 676,000 originally reported for the previous month.
With the much bigger than expected increase, new home sales continued to rebound after falling to the lowest annual rate in well over a year in April and reached their highest level since July of 2007.
The spotlight may shift to the Federal Reserve’s monetary policy meeting next week, although the central bank is widely expected to leave interest rates unchanged.
Since rates are already at near-zero levels, traders may look to the Fed’s accompanying statement for clues about future plans to provide additional economic stimulus.
Traders are also likely to keep an eye on reports on durable goods orders, consumer confidence, pending home sales and personal income and spending as well as the first reading on second quarter GDP.
The Treasury Department is also due to announce the results of this month’s auctions of two-year, five-year and seven-year notes.
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