Treasuries Recover From Early Weakness But Still Close Modestly Lower

(RTTNews) - After coming under pressure in early trading on Friday, treasuries regained some ground over the course of the session but still closed modestly lower.

Bond prices moved back to the downside going into the close, ending the day in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.8 basis points to 2.604 percent after reaching a high of 2.644 percent.

The early weakness among treasuries came after the Labor Department released a report showing an unexpected decrease in producer prices in the month of May, with the drop partly reflecting a notable decrease in prices for trade services.

The Labor Department said its producer price index for final demand dipped by 0.2 percent in May after climbing by 0.6 percent in April.

The modest decrease by the index came as a surprise to economists, who had expected prices to inch up by 0.1 percent.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May following a 0.5 percent increase in April. Economists had expected core prices to tick up by 0.1 percent.

Meanwhile, Thomson Reuters and the University of Michigan released a separate report showing an unexpected deterioration in U.S. consumer sentiment in the month of June.

The report showed that the preliminary reading on the consumer sentiment index for June came in at 81.2 compared to the final May reading of 81.9. Economists had been expecting the index to climb to 83.0.

The recovery attempt by treasuries was partly attributed to remarks by President Barack Obama declaring that he will not send U.S. troops back into combat in Iraq despite the escalating violence in the country.

Next week, the Federal Reserve will move back into the spotlight, with the central bank scheduled to announce its latest monetary policy decision on Wednesday.

Traders are also likely to keep an eye on the Fed's economic projections as well as Fed Chair Janet Yellen's accompanying press conference.

Ahead of the Fed meeting, trading could be impacted by the release of reports on industrial production, homebuilder confidence, housing starts, and consumer price inflation.