Treasuries Close Notably Higher Amid Falling Oil Prices

(RTTNews) - After ending the previous session slightly lower, treasuries showed a strong move back to the upside during trading on Friday.

Bond prices moved notably higher in morning trading and remained firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 7.5 basis points to 2.103 percent.

With the decrease on the day, the ten-year yield extended a recent downward move, hitting its lowest closing level in almost two months.

The strength among treasuries was primarily attributed to another sharp decrease by the price of crude oil, with crude for January delivery tumbling $2.14 to a new five-year low of $57.81 a barrel.

The recent sell-off by crude oil prices has led to speculation that low inflation could lead the Federal Reserve to delay its plans to raise interest rates.

Reflecting the recent drop in energy prices, the Labor Department released a report showing that U.S. producer prices fell by slightly more than anticipated in the month of November.

The Labor Department said its producer price index for final demand fell by 0.2 percent in November after rising by 0.2 percent in October. Economists had expected the index to edge down by 0.1 percent.

Excluding food and energy prices, the core producer price index came in unchanged in November after rising by 0.4 percent in the previous month. Core prices had been expected to inch up by 0.1 percent.

Meanwhile, traders largely shrugged off a separate report from Thomson Reuters and the University of Michigan showing a bigger than expected jump in consumer sentiment.

The Fed will take center stage next week, as the central bank is scheduled to announce its latest monetary policy decision on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, traders will be paying close attention to whether it reiterates its intention to keep rates at low levels for a "considerable time."

Ahead of the Fed announcement, trading could be impacted by the release of reports on industrial production, housing starts, and consumer prices.