Treasuries Move Modestly Higher After Seeing Early Weakness

After moving modestly lower early in the session, treasuries turned higher over the course of the trading session on Friday.

Bond prices moved to the upside going into the close after spending much of the session lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.4 basis points to 2.106 percent.

Treasuries may have benefited from their appeal as a safe haven as traders brace for the unofficial start of corporate earnings season next week.

Citigroup (C), Goldman Sachs (GS), Johnson & Johnson (JNJ), JPMorgan (JPM), Wells Fargo (WFC), IBM (IBM), Netflix (NFLX), Microsoft (MSFT), and American Express (AXP) are among the slew of companies due to report their quarterly results.

The early weakness among treasuries came following the release of a report from the Labor Department showing U.S. producer prices unexpectedly edged higher in the month of June.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in June, matching the uptick seen in May. Economists had expected producer prices to come in unchanged.

Excluding food and energy prices, core producer prices climbed by 0.3 percent in June after rising by 0.2 percent in May. Core prices had been expected to show another 0.2 percent increase.

“The small gain in producer prices in June suggests the increase in tariffs on $200bn of imports from China has yet to generate a pick-up in inflation and confirms that underlying domestic inflationary pressures remain subdued,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, “That should help ease any fears, following the June CPI figures released yesterday, that underlying consumer price inflation will rise back above 2%.”

Earnings news is likely to be in the spotlight next week, although traders are also likely to keep an eye on reports on retail sales, industrial production, housing starts and homebuilder confidence.

The Federal Reserve is also scheduled to release its Beige Book, which may shed additional light on the near-term outlook for interest rates.

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