Treasuries Extend Decline Amid Renewed Rate Hike Worries

(RTTNews) - After moving notably lower over the course of the previous session, treasuries saw some further downside during trading on Friday.

Bond prices came under pressure in early trading and remained firmly negative for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.6 basis points to 1.672 percent.

With the substantial increase seen over the past two sessions, the ten-year yield reached its highest closing level in well over two months.

The continued weakness among treasuries came as comments from some Federal Reserve officials led to renewed concerns about a near-term interest rate hike.

In a speech this morning, Boston Fed President Eric said gradual tightening of monetary policy is likely to be appropriate to ensure the U.S. economy remains at the full employment level it is now approaching.

Rosengren added that "a failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery."

Dallas Fed President Robert Kaplan also said the case for raising rates has strengthened in recent months and noted the markets have gotten plenty of notice the Fed is looking for opportunities to remove accommodation.

Meanwhile, Fed Governor Daniel Tarullo told CNBC a rate hike this year is possible but said he wants to see more evidence of sustained inflation before considering an increase.

The Fed is scheduled to hold its next monetary policy meeting in about two weeks, with two subsequent meetings scheduled for November and December.

The economic calendar for next week starts out relatively quiet but heats up considerably in the latter part of the week.

Traders are likely to keep a close eye on reports on retail sales, industrial production, and producer and consumer price inflation.

Bond trading could also be impacted by reaction to the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury said it plans to auction $24 billion worth of three-year notes and $20 billion worth of ten-year notes next Monday and $12 billion worth of thirty-year bonds next Tuesday.