Treasuries Close Modestly Higher After Recovering From Initial Drop

(RTTNews) - After recovering from an initial move to the downside, treasuries moved modestly higher over the course of the trading session on Friday.

Bond prices lingered near the unchanged line for much of the session 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 1.675 percent.

The turnaround by treasuries came after a report from Bloomberg News said Trump administration officials are discussing ways to limit U.S. investors' portfolio flows into China.

Citing people familiar with the internal deliberations, Bloomberg noted the move would have repercussions for billions of dollars in investment pegged to major indexes.

A source family with the matter confirmed to CNBC that the White House is weighing some curbs on U.S. investments in China but noted the discussions are in the preliminary stages and nothing has been decided.

The reports reflect the ever-changing landscape of U.S.-China relations that has kept traders reluctant to make significant bets.

Earlier in the day, traders expressed some optimism about U.S.-China trade talks after a report from CNBC said negotiations are set to resume October 10th in Washington.

A person close to the talks said Chinese Vice Premier Liu He will be representing the delegation from Beijing at the meetings.

The U.S. and China held deputy-level trade talks last week, although Treasury Secretary Steven Mnuchin called off a trip by Chinese officials to U.S. farms.

On the U.S. economic front, the Commerce Department released a report unexpectedly showing a modest increase in U.S. durable goods orders in the month of August.

The Commerce Department said durable goods orders rose by 0.2 percent in August after jumping by 2.0 percent in July. The continued increase surprised economists, who had expected orders to pull back by 1.0 percent.

Excluding a drop in orders for transportation equipment, durable goods orders increased by 0.5 percent in August after falling by 0.5 percent in July. Economists had expected ex-transportation orders to rise by 0.2 percent.

However, the report also said orders for non-defense capital goods excluding aircraft, a key indicator of business spending, edged down by 0.2 percent in August after coming in unchanged in July.

A separate Commerce Department report showed U.S. personal income rose in line with economist estimates in the month of August, although personal spending inched up by less than expected.

The Commerce Department said personal income climbed by 0.4 percent in August after ticking up by 0.1 percent in July. The increase in income matched economist estimates.

Meanwhile, the report said personal spending crept up by 0.1 percent in August after climbing by 0.5 percent in July. Spending had been expected to rise by 0.3 percent.

Economic data may move back into the spotlight next week, with the Labor Department due to release its closely watched monthly jobs report next Friday.

Reports on manufacturing and service sector activity, private sector employment, and the U.S. trade deficit are also likely to attract some attention.