Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - After coming under pressure in early trading on Friday, treasuries regained some ground over the course of the session but still ended the day modestly lower.

While bond prices climbed well off their early lows, they still finished the session in the red. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1 basis point to 2.457 percent after reaching a high of 2.491 percent.

With the modest uptick on the day, the ten-year yield climbed further off the eleven-month closing low that it set on Wednesday.

The initial weakness among treasuries came on the heels of another batch of mixed U.S. economic data, with separate reports showing an unexpected drop in personal spending in April and an acceleration in Chicago-area business activity in May.

The Commerce Department released a report showing that personal spending edged down by 0.1 percent in April after surging up by 1.0 percent in March. The modest decrease surprised economists, who had expected spending to rise by 0.2 percent.

The unexpected drop in spending came despite a continued increase in personal income, which rose by 0.3 percent in April following a 0.5 percent increase in March. The increase marked the fourth straight month of growth and matched expectations.

Meanwhile, MNI Indicators released a separate report showing that its reading on Chicago-area business activity unexpectedly rose to a seven-month high in May.

MNI Indicators said its Chicago business barometer climbed to 65.5 in May from 63.0 in April, with a reading above 50 indicating an increase in activity. Economists had expected the barometer to dip to 61.0.

Thomson Reuters and the University of Michigan also released a report showing a slight upward revision to their reading on consumer sentiment in May, although it remained below the final April reading.

Selling pressure waned over the course of the morning, however, and treasuries climbed well off their lows as traders looked ahead to next Thursday's monetary policy decision by the European Central Bank.

While the ECB meeting is likely to be in focus next week, traders are also likely to keep a close eye on the release of the monthly U.S. jobs report on Friday.

Ahead of both the ECB meeting and the jobs report, trading could be impacted by reports on manufacturing activity, private sector employment, and international trade as well as the Federal Reserve's Beige Book.