Treasuries Move Back To The Downside After Yesterday's Rebound

(RTTNews) - Following the rebound seen in the previous session, treasuries showed a notable move back to the downside during trading on Friday.

Bond prices came under pressure going into the close, ending the day firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 5.6 basis points to 1.794 percent.

With the increase on the day, the ten-year yield more than offset the drop seen on Thursday, reaching a new four-month closing high.

The decline seen by treasuries late in the session came as traders reacted to remarks by Federal Reserve Chair Janet Yellen.

Speaking at a Boston Fed conference, Yellen suggested the central should consider running a "high-pressure economy" to address the lingering effects of the financial crisis.

Yellen said it is reasonable to ask whether it might be possible to reverse adverse supply-side effects by temporarily running a "high-pressure economy" with robust aggregate demand and a tight labor market.

Earlier in the day, traders were presented with a slew of U.S. economic data, including a Commerce Department report showing that retail sales rose in line with economist estimates in the month of September.

The Commerce Department said retail sales climbed by 0.6 percent in September after edging down by a revised 0.2 percent in August.

Excluding a jump in auto sales, retail sales still rose by 0.5 percent in September after dipping by 0.2 percent in August. The increase in ex-auto sales also matched estimates.

However, the report also said closely watched core retail sales, which exclude autos, gasoline, building materials and food service, edged up by a smaller than expected 0.1 percent.

A separate report from the Labor Department showed that producer prices increased by slightly more than anticipated in September.

The Labor Department said its producer price index for final demand climbed by 0.3 percent in September after coming in unchanged in August. Economists had expected prices to edge up by 0.2 percent.

Excluding food and energy prices, core producer prices rose by 0.2 percent in September after inching up by 0.1 percent in August. Core prices had been expected to show another 0.1 percent uptick.

ING Senior Economist James Knightley, said, "Overall, the reasonably firm retail sales number and slightly higher inflation data support the idea of a Federal Reserve rate hike in December."

"The only things that can really stop momentum building for such a move would be a market unfriendly election outcome and softness in the two payrolls reports between now and the December FOMC," he added.

Meanwhile, the University of Michigan released a report showing that consumer sentiment unexpectedly fell to its lowest level in a year in October.

Next week will also see the release of some key economic data, including reports on industrial production, consumer prices, housing starts, and existing home sales.

The Fed is also due to release its Beige Book, which could shed some additional light on the outlook for monetary policy.