Treasuries Pull Back Off Best Levels But Close Modestly Higher

Treasuries moved to the upside in morning trading on Friday but gave back ground over the course of the afternoon.

Bond prices pulled back well off their best levels of the day but managed to close in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 2.743 percent.

With the modest decrease on the day, the ten-year yield ended the session at its lowest closing level in well over a month.

Treasuries initially benefited from the release of a Commerce Department report showing a slowdown in the pace of core consumer price growth in the month of April.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth slowed to 4.9 percent in April from 5.2 percent in March.

The data contributed to optimism that the Fed will slow the pace of monetary policy tightening in the second half of the year.

Stocks also rallied in reaction to the inflation data, however, resulting in the subsequent pullback by treasuries.

The inflation reading was included in a report showing personal income in the U.S. increased by slightly less than expected in the month of April.

The report showed personal income rose by 0.4 percent in April after climbing by 0.5 percent in March. Economists had been expecting another 0.5 percent increase.

Meanwhile, the Commerce Department said personal spending advanced by 0.9 percent in April after surging by an upwardly revised 1.4 percent in March.

Personal spending was expected to increase by 0.7 percent compared to the 1.1 percent jump originally reported for the previous month.

A separate report from the University of Michigan showed consumer sentiment in the U.S. deteriorated by even more than previously estimated in the month of May.

The report showed the consumer sentiment index for May was downwardly revised to 58.4 from the preliminary reading of 59.1. Economists had expected the index to be unrevised.

The consumer sentiment index is even further below the April reading of 65.2, slumping to its lowest level since hitting 55.8 in August of 2011.

Following the long holiday weekend, the monthly jobs report is likely to be in focus next week along with reports on manufacturing and service sector activity and the Fed’s Beige Book.

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