Treasuries Close Modestly Higher On Relatively Quiet Day

(RTTNews) - After ending the previous session firmly in the red, treasuries showed a modest move back to the upside during trading on Friday.

Bond prices showed a lack of direction in early trading but climbed somewhat more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.6 basis points to 2.732 percent.

With the slight drop on the day, the ten-year yield partly offset the gain posted on Thursday but remains above Wednesday's one-month closing low.

The modest strength among treasuries came as traders continued to digest the Federal Reserve's surprise decision to refrain from scaling back its stimulus program.

Ahead of a speech on monetary policy to the New York Association for Business Economics, St. Louis Fed President James Bullard told Bloomberg News that the decision to hold off on tapering was a "borderline" call that reflected weaker data.

Bullard said the Fed's next meeting in late October would be a "live meeting," noting that "it's possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October."

Kansas City Fed President Esther George, who voted against the recent Fed decision, also delivered remarks before the Shadow Open Market Committee in New York.

Noting that the markets were prepared for tapering, George argued that Fed signals without follow-through erode the intent of policy and threaten to hurt the central bank's credibility.

"Clearly the actions at this meeting, and the expectations that had been set relative to how markets were thinking about this, created confusion, created a disconnect," George said.

In light of the Fed's remarks highlighting the importance of incoming economic data, next week's trading may be driven by reaction to a batch of reports on durable goods orders, new home sales, and personal income and spending.