Treasuries Show Notable Move Back To The Downside

(RTTNews) - Treasuries showed a notable move to the downside during trading on Friday, giving back ground after trending higher over the past several sessions.

Bond price came under pressure early in the session and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 5.0 basis points to 4.061 percent.

With the increase on the day, the ten-year yield regained ground after slumping to its lowest closing level in five months on Thursday.

The pullback by treasuries came as traders looked to cash in on the recent strength in the bond markets ahead of the Federal Reserve's monetary policy announcement next Wednesday.

With recent data showing relatively subdued inflation and a weakening labor market, the Fed is widely expected to lower interest rates by at least a quarter point.

CME Group's FedWatch Tool is currently indicating a 94.5 percent chance the Fed will cut rates by 25 basis points and a slim 5.5 percent chance of a half-point rate cut.

Traders are likely to pay close attention to the Fed's accompanying statement as well as Fed Chair Jerome Powell's post-meeting comments for clues about the likelihood of further rate cuts.

Currently, the Fed is widely expected to lower rates by another 25 basis points at both its October and December meetings, although Powell is likely to say future rate cuts will depend on incoming economic data.

In U.S. economic news, preliminary data released by the University of Michigan showed consumer sentiment in the U.S. has deteriorated by much more than anticipated in the month of September.

The University of Michigan said its consumer sentiment index fell to 55.4 in September from 58.2 in August. Economists had expected the index to edge down to 58.0.

On the inflation front, year-ahead inflation expectations held steady at 4.8 percent, while long-run inflation expectations rose for the second straight month, jumping to 3.9 percent in September from 3.5 percent in August.

The Fed's monetary policy decision is likely to be in the spotlight next week, although traders are also likely to keep an eye on reports on retail sales, industrial production, import and export prices and housing starts.