Treasuries Move To The Downside After Early Volatility

After initially seeing considerable volatility, treasuries moved to the downside over the course of the trading session on Friday.

Bond prices bounced back and forth across the unchanged early in the session but spent the afternoon firmly in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 2.476 percent.

The higher close by treasuries came as traders shrugged off a disappointing batch of data amid continued optimism about the economic outlook.

Early in the day, a closely watched report from the Labor Department showed weaker than expected job growth in the month of December.

The report said non-farm payroll employment climbed by 148,000 jobs in December after spiking by an upwardly revised 252,000 jobs in November.

Economists had expected employment to increase by 190,000 jobs compared to the addition of 228,000 jobs originally reported for the previous month.

Traders largely shrugged off the report, however, as analysts suggested that recent data points to overall strength in the labor market.

“While the headline job gain number may have disappointed, the average over the last three months was still very strong,” said Joel Naroff, president and chief economist at Naroff Economic Advisors.

A separate report from the Institute for Supply Management showed an unexpected slowdown in the pace of growth in activity in the service sector.

The ISM said that its non-manufacturing index dropped to 55.9 in December from 57.4 in November. While a reading above 50 still indicates growth in the service sector, economists had expected the index to inch back up to 57.6.

Nonetheless, Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee, said the majority of respondents’ comments indicate they finished the year on a positive note.

In other economic news, the Commerce Department reported the widest trade deficit in nearly six years in November, while factory orders jumped more than expected during the month.

The economic calendar for next week starts of relatively quiet, although reports on retail sales and producer and consumer prices are likely to attract attention in the latter part of the week.

Bond traders are also likely to keep an eye on the results of the Treasury Department’s auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury plans to sell $24 billion worth of three-year notes next Tuesday, $20 billion worth of ten-year notes next Wednesday and $12 billion worth of thirty-year bonds next Thursday.

The material has been provided by InstaForex Company – www.instaforex.com