Treasuries Give Back Ground Following Recent Rally

(RTTNews) - Treasuries moved to the downside during trading on Friday, giving back some ground after trending higher after the past three weeks.

Bond prices came under pressure in early trading and remained stuck in the red for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4 basis points to 1.815 percent.

With the increase on the day, the ten-year yield recovered slightly after ending the previous session at its lowest closing level in well over a year.

The pullback by treasuries was partly due to profit taking following the recent strength, which reflected concerns about the global economic outlook.

A sharp increase by the price of crude oil also weighed on treasuries, with crude for February delivery jumping $2.44 to $48.69 a barrel.

Prices were boosted when the International Energy Agency said the collapse in oil prices is expected to curtail non-OPEC oil production this year.

"A price recovery--barring any major disruption--may not be imminent, but signs are mounting that the tide will turn," the IEA said as it slashed its forecast for an increase in non-OPEC oil supply this year by 350,000 barrels a day.

Meanwhile, traders also continued to digest the Swiss National Bank's surprise decision to remove its currency cap as well as another batch of U.S. economic data.

The Labor Department released a report this morning showing that consumer prices saw the biggest decrease in six years in December amid another sharp drop in energy prices.

The report said its consumer price index fell by 0.4 percent in December, reflecting the biggest monthly decrease since December of 2008.

Excluding food and energy prices, the Labor Department said the core consumer price index came in unchanged in December after edging up by 0.1 percent in November.

A separate report from the Federal Reserve showed a modest pullback in industrial production in December, while the University of Michigan said its consumer sentiment index jumped to an eleven-year high in January.

Following the long holiday weekend, traders are likely to focus on the outcome of the European Central Bank's monetary policy meeting next Thursday.

Many analysts expect the ECB to expand its quantitative easing program, particularly after this week's surprise move by the Swiss National Bank.

U.S. housing data may also attract attention, as traders will be presented with reports on homebuilder confidence, housing starts, and existing home sales.