Treasuries Close Modestly Lower Following Choppy Trading Day

(RTTNews) - Treasuries showed a lack of direction throughout the trading day on Friday before ending the session modestly lower.

After spending the day bouncing back and forth across the unchanged line, bond prices moved to the downside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.6 basis points to 2.112 percent.

The choppy trading seen for much of the session came as traders were looking ahead to the Federal Reserve's monetary policy meeting next week.

While the Fed is not expected to announce an increase in interest rates, traders will be paying close attention to any changes to the accompanying statement.

Traders were also digesting a report from the Labor Department showing an unexpected decrease in producer prices in the month of February.

The Labor Department said its producer price index for final demand fell by 0.5 percent in February after slumping by 0.8 percent in January.

The continued decrease by the index came as a surprise to economists, who had expected producer prices to rise by about 0.3 percent.

Core producer prices, which exclude food and energy prices, also dropped 0.5 percent in February after edging down by 0.1 percent in January. Economists had expected core prices to tick up by 0.1 percent.

While the report showed a notable decrease in prices for services, analysts said the drop was primarily due to a quirk in the calculation of margins.

"Bottom line, ever since the BLS reconstituted its measurement of PPI, it's gotten somewhat more confusing to analyze but it's clear that lower commodity prices continue to have a big influence on overall wholesale prices," said Peter Boockvar, managing director at the Lindsey Group.

"In terms of what this means for the Fed, I don't believe it does at all," he added. "The labor market indicators are flashing red on the Fed's dashboard in terms of future inflationary implications for wages and that is why we continue to believe in the June rate hike."

Meanwhile, the University of Michigan released a separate report showing an unexpected deterioration in consumer sentiment in the month of March.

The report showed that the consumer sentiment index tumbled to 91.2 in March from the final February reading of 95.4. Economists had expected the index to inch up to a reading of 96.0.

The Fed is likely to be in the spotlight next week, with the central bank due to announce its monetary policy decision on Wednesday followed by a press conference by Fed Chair Janet Yellen.

With the focus on the Fed, traders may overlook reports on industrial production, homebuilder confidence, housing starts and regional manufacturing activity.