Treasuries Extend Rebound Following Weaker Than Expected Economic Data

Extending the rebound seen over the course of the previous session, treasuries moved to the upside during trading on Friday.

Bond prices moved higher early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 1.635 percent.

The continued advance by treasuries came as some weaker than expected U.S. economic data eased concerns about the Federal Reserve tightening monetary policy.
A report from the Commerce Department showed retail sales were virtually unchanged in April after soaring by an upwardly revised 10.7 percent in March.

Economists had expected retail sales to jump by 1.0 percent compared to the 9.8 percent spike originally reported for the previous month.

“Retail sales cooled in April, with a flat reading, as the sugar rush from generous fiscal transfers, rapid vaccinations and warmer weather faded,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.

He added, “But don’t be fooled, stronger consumer spending activity lies ahead as US households have the means and the motivation to spend freely.”

A separate report from the Federal Reserve showed industrial production in the U.S. increased by less than expected in the month of April.

The report said industrial production climbed by 0.7 percent in April after soaring by an upwardly revised 2.4 percent in March.

Economists had expected industrial production to surge up by 1.0 percent compared to the 1.4 percent jump originally reported for the previous month.

Meanwhile, University of Michigan released a report showing consumer sentiment in the U.S. has unexpectedly decreased in the month of May.

The report showed the consumer sentiment index dropped to 82.8 in May from 88.3 in April. The decrease surprised economists, who had expected the index to rise to 90.4.

Next week’s trading may be impacted by reaction to reports on homebuilder confidence, housing starts and existing home sales, while traders are also likely to keep an eye on the minutes of the latest Fed meeting.

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