Treasuries Finish Choppy Trading Day Modestly Higher

(RTTNews) - Following the pullback seen in the previous session, 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 moving to the upside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1 basis point to 1.506 percent.

The choppy trading on the day came as traders expressed uncertainty about whether the U.S. and China will resume trade talks next month and finally reach an elusive trade deal.

President Donald Trump has repeatedly claimed the Chinese are desperate to reach an agreement, arguing the U.S. tariffs on Chinese goods are doing significant damage to the world's second largest economy.

Trump told Fox News on Thursday that the U.S. and China were scheduled to hold talks at a "different level," although he did not clarify what that means.

Meanwhile, China has signaled that they do not currently intend to retaliate against Trump's latest threat to raise the rate of tariffs on Chinese imports.

Chinese officials have expressed interest in negotiating an end to the escalating trade dispute but argued the U.S. has to create conditions for the two sides to resume talks on the basis of mutual respect.

A mixed batch of U.S. economic data also contributed to the lackluster performance on the day, as some traders looked to get a head start on the holiday weekend.

Early in the day, the Commerce Department released a report showing personal income crept up by less than expected in the month of July, although the report still showed a bigger than expected increase in personal spending during the month.

The Commerce Department said personal income inched up by 0.1 percent in July after climbing by an upwardly revised 0.5 percent in June.

Economists had expected personal income to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Meanwhile, the report said personal spending grew by 0.6 percent in July after rising by an unrevised 0.3 percent in June. Personal spending had been expected to climb by 0.5 percent.

With spending rising by much more than income, personal saving as a percentage of disposable personal income slumped to 7.7 percent in July from 8.0 in June.

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

The report said the consumer sentiment index for August was downwardly revised to 89.8 from the preliminary reading of 92.1.

The revised reading is down sharply from the final July reading of 98.4, showing the biggest monthly drop since December of 2012.

Surveys of Consumers chief economist Richard Curtin noted the plunge in late 2012 reflected widespread fears of being pushed off the "fiscal cliff" due to then-impending increases in tax rates and decreases in government spending.

"The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one-in-three consumers," Curtin said. "Unlike concerns about the fiscal cliff, which were promptly resolved, Trump's tariff policies have been subject to repeated reversals amid threats of higher future tariffs."

"Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home," he added. "Unlike the repeated tariff reversals, negative trends in consumer sentiment cannot be easily reversed."

Following the long weekend, next week's trading may be impacted by some key U.S. economic data, including the closely watched monthly jobs report.

Reports on manufacturing and service sector activity and the U.S. trade deficit are also likely to attract attention along with the Federal Reserve's Beige Book.