Treasuries Move To The Downside After Yellen Remarks

(RTTNews) - Treasuries came under pressure during trading on Friday, giving back some ground after moving notably higher in the previous session.

Bond prices moved modestly lower in early trading and saw further downside going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 2.8 basis points to 1.851 percent.

The late-day drop by treasuries came as remarks by Federal Reserve Chair Janet Yellen hinted at the likelihood of a summertime interest rate hike.

During a conversation with Harvard Professor Gregory Mankiw, Yellen said she expects the economy to continue to improve and said it may be appropriate for the Fed to raise interest rates in the coming months.

"I think for the Fed to gradually and cautiously increase our overnight interest over time and probably in the coming months, such a move would be appropriate," Yellen said.

The Fed Chief also said she expects inflation to move back up to the central bank's 2 percent objective as crude oil prices have steadied near $50 a barrel after plunging to $26 a barrel earlier in the year.

Yellen's remarks came after the Commerce Department released a report early in the day showing stronger than previously estimated first quarter GDP growth.

The report said the pace of GDP growth in the first quarter was upwardly revised to 0.8 percent from the initial estimate of 0.5 percent.

Nonetheless, the revised GDP growth in the first quarter compares to the 1.4 percent jump seen in the fourth quarter and the 0.9 percent increase expected by economists.

A separate report from the University of Michigan showed a modest downward revision to its consumer sentiment index for May, although the index was still at an eleven-month high.

Following the long holiday weekend, economic data is likely to be in focus next week, particularly the monthly jobs report due next Friday.

Reports on personal income and spending, consumer confidence, and manufacturing and service sector activity may also attract attention along with the Fed's Beige Book.