Treasuries Give Back Ground As Gross Leaves Pimco

(RTTNews) - After ending the previous session notably higher, treasuries gave back some ground over the course of the trading day on Friday.

Bond prices moved to the downside in early trading and remained stuck in the red for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.4 basis points to 2.535 percent.

The pullback by treasuries was partly attributed to news that bond guru Bill Gross has left his post as chief investment officer at Pimco to join the rival investment firm Janus Capital Group (JNS).

The news of Gross' departure led to concerns that investors will pull cash from Pimco, the world's largest bond fund manager.

Traders were also reacting to a report from the Commerce Department showing that U.S. gross domestic product grew faster than previously estimated in the second quarter.

The Commerce Department said GDP increased by 4.6 percent in the second quarter compared to the previously reported 4.2 percent growth.

The upwardly revised growth, which matched economists' consensus estimate, reflects a notable turnaround from the 2.1 percent contraction seen in the first quarter.

With the upward revision, the GDP growth in the second quarter reflected the biggest jump since a matching increase in the fourth quarter of 2011.

However, Chris Low, chief economist at FTN Financial, noted that recent strength in GDP has typically been followed by a pullback.

"The economy has only reached a 4.5% growth rate three times in this expansion, and the second quarter of 2014 is one of the three," Low said. "In each case, the prior quarter's growth was less than 2% and growth weakened in ensuing quarters."

He added, "The Fed is optimistic the third time will be the charm, but we are skeptical as Q1 was the weakest quarter of the expansion to date. Growth in the first half, even with this revision, was just 1.25%."

Thomson Reuters and the University of Michigan also released a report showing an unrevised improvement in consumer sentiment in the month of September.

A slew of economic data is scheduled to be released next week, although traders are likely to be focused on the monthly employment report due next Friday.

Ahead of the release of the jobs data, trading could be impacted by reports on personal income and spending, pending home sales, and national manufacturing activity.