Treasuries Close Notably Higher In Reaction To Move By Bank Of Japan

(RTTNews) - Treasuries moved sharply higher during trading on Friday in reaction to a surprise monetary policy move by the Bank of Japan.

Bond prices showed a strong move to the upside in morning trading and remained firmly positive in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.4 basis points to 1.931 percent.

With the notable decrease on the day, the ten-year yield ended the session at its lowest closing level in nine months.

The strength among treasuries came in response to the Bank of Japan's surprise decision to introduce negative interest rates.

The bank decided by a 5 to 4 majority vote to apply a negative 0.1 percent interest rate on current accounts financial institutions maintain with the bank, effective February 16th.

The move is expected to boost the struggling Japanese economy by encouraging banks to lend more and inspiring consumers to spend rather than save.

Traders were also reacting to the latest U.S. economic news, including a Commerce Department report showing a notable slowdown in GDP growth in the fourth quarter.

The report said real GDP increased by 0.7 percent in the fourth quarter compared to the 2.0 percent growth reported for the third quarter. Economists had expected GDP to rise by about 0.8 percent.

A separate report from the University of Michigan unexpectedly showed a deterioration in consumer sentiment in January, while MNI Indicators reported a substantial rebound in Chicago-area business activity.

Next week's trading may be driven by reaction to some key U.S. economic data, with the Labor Department's monthly jobs report due out next Friday.

Ahead of the jobs report, traders are likely to keep an eye on reports on manufacturing and service sector activity, personal income and spending, and labor productivity and costs.