Treasuries Close Roughly Flat After Seeing Early Strength

After failing to sustain an early move to the upside, treasuries gave back ground over the course of the trading session on Friday.

Bond prices pulled back well off their early highs, ending the day roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 4.628 percent after hitting a low of 4.567 percent.

The early strength among treasuries came on the heels of the steep drop seen in afternoon trading on Thursday, which followed a disappointing thirty-year bond auction and hawkish remarks by Federal Reserve Chair Jerome Powell.

Powell said the Fed is not yet confident rates are at a sufficiently restrictive level to bring inflation down to 2 percent and warned the central bank would not hesitate to resume raising rates.

Despite Powell’s comments, CME Group’s FedWatch Tool currently still suggests the Fed is likely to leave interest rates over the next several months before cutting rates in mid-2024.

However, treasuries gave back ground after the University of Michigan released a report showing a bigger than expected drop in consumer sentiment and an increase in inflation expectations.

The University of Michigan said its consumer sentiment index slid to 60.4 in November from 63.8 in October. Economists had expected the index to edge down to 63.7.

The consumer sentiment index decreased for the fourth consecutive month, falling to its lowest level since hitting 59.0 in May.

The report also said year-ahead inflation expectations rose to 4.4 percent in November from 4.2 percent in October, reaching the highest level since hitting 4.7 percent in April.

Long-run inflation expectations also increased from 3.0 percent in October to 3.2 percent in November, marking the highest reading since 2011.

Inflation data will be in the spotlight next week, with reports on consumer and producer prices likely to be in focus as traders look for additional clues about the outlook for interest rates.

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