Treasuries Pull Back Off Best Levels But Close Slightly Higher

(RTTNews) - After showing a strong move to the upside in early trading on Friday, treasuries gave back some ground as the day progressed but still closed slightly higher.

Bond price moved roughly sideways going into the close, hovering just above the unchanged line. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by almost a basis point to 2.415 percent.

While the ten-year yield ended the session well off its intraday low of 2.37 percent, it still ended the day at its lowest closing level in over a year.

The early strength among treasuries was partly due to the news from overnight that President Barack Obama has authorized U.S. airstrikes in Iraq.

In a statement from the White House Thursday evening, Obama indicated that the U.S. would begin attacking Islamic militants in northern Iraq in an effort to protect American interests and personnel in the region.

The president said that U.S. action - taken at the request of the Iraqi government - will also include what he called humanitarian relief in the face of potential genocide.

However, Obama stressed that American combat troops will not be returning to fight in Iraq, providing some confidence that U.S. involvement will be limited.

The subsequent pullback by treasuries was partly due to optimism about a potential de-escalation of the crisis in eastern Ukraine following comments from Nikolai Patrushev, Secretary of the Russian Security Council.

Patrushev told Russian news agency RIA Novosti that Russia is ready to mediate talks between the Ukrainian government and pro-Russian separatists.

"We are interested in peace in Ukraine and in bringing the sides to the negotiating table so that they could settle their disputes," Patrushev told RIA in an interview. "Russia will continue to make every effort for the soonest de-escalation of tensions."

He added, "As for mediation, of course, we are ready to assist in the process of the discussion and we have said so on numerous occasions."

Meanwhile, traders largely shrugged off a report from Labor Department showing that labor productivity increased by more than anticipated in the second quarter.

Developments overseas are likely to remain in focus in the early part of next week amid the absence of any major U.S. economic reports.

Economic data is likely to attract increased attention as the week progresses, however, with traders likely to keep an eye on reports on retail sales, producer prices, and industrial production.