After ending the previous session modestly lower, treasuries moved back to the upside over the course of the trading day on Friday.
Bond prices fluctuated early in the session before climbing firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.2 basis points to 2.831 percent.
The higher close by treasuries came following the release of a report from the University of Michigan showing an unexpected deterioration in U.S. consumer sentiment in the month of July.
The preliminary report said the consumer sentiment index dipped to 97.1 in July from the final June reading of 98.2. Economists had expected the index to come in unchanged.
Despite the unexpected decrease, Surveys of Consumers chief economist Richard Curtin noted the reading for July remained nearly equal to the 97.7 average in the prior twelve months.
“So far, the strength in jobs and incomes has overcome higher inflation and interest rates,” Curtin said. “The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy.”
He added, “Negative concerns about the impact of tariffs have recently accelerated, rising from 15% in May, to 21% in June, and 38% in July.”
Meanwhile, traders largely shrugged off the Federal Reserve’s semi-annual monetary policy to Congress, which offered few surprises.
The Fed described economic growth in the first half of the year as solid and reiterated it expects further gradual increases in interest rates.
“The Federal Reserve remains positive on the U.S. economic outlook with barely any mention of the trade or yield curve worries that are preoccupying markets,” said James Knightley, Chief International Economist at ING.
Next week’s trading may be impacted by reaction to some key U.S. economic data, including reports on retail sales, industrial production, and housing stocks.
Fed Chairman Jerome Powell’s two days of testimony on Capitol Hill are also likely to attract attention, as traders look for clues about the outlook for interest rates.
Traders are also likely to keep an eye on President Donald Trump’s highly anticipated meeting with Russian President Vladimir Putin in Helsinki, Finland, on Monday.