Treasuries Move Notably Higher On Disappointing Economic Data

(RTTNews) - With traders reacting to a pair of disappointing U.S. economic reports, treasuries moved notably higher over the course of the trading day on Friday.

After moving sharply higher in early trading, bond prices gave back some ground but remained firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.7 basis points to 2.123 percent.

Treasuries extended a recent upward move with the gains, with the ten-year yield closing lower for the fifth consecutive session.

The continued strength among treasuries came following the release of a report from the Institute for Supply Management showing a significant slowdown in the pace of growth in the manufacturing sector in the month of December.

The ISM said its purchasing managers index fell to 55.5 in December from 58.7 in November, although a reading above 50 indicates continued growth in the manufacturing sector.

Economists had expected the index to drop to 57.5. With the bigger than expected decrease, the index fell to its lowest level since hitting 55.3 in June.

A separate report from the Commerce Department showing an unexpected drop in construction spending in November has also contributed to the appeal of treasuries.

The disappointing data overshadowed comments from European Central Bank president Mario Draghi adding to speculation that the bank will provide further stimulus.

In an interview with German financial daily Handelsblatt, Draghi said that the risk of deflation in the euro area has risen and said the ECB is preparing to react to such a threat.

Draghi's comments suggested that the ECB is moving closer to unleashing full-blown quantitative easing, including sovereign bond purchases.

Following two holiday-interrupted weeks, trading is likely to return to normal next week, with the spotlight likely to be on the monthly jobs report.

Ahead of the release of the jobs report next Friday, trading could be impacted by reports on service sector activity, private sector employment and international trade.

The Federal Reserve is also scheduled to release the minutes of its latest monetary policy meeting, which could shed some light on the outlook for monetary policy.