After ending the previous session little changed, treasuries showed a significant move to the downside during trading on Friday.
Bond prices moved sharply lower in morning trading and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.8 basis points to 1.635 percent.
With the substantial increase on the day, the ten-year yield ended the session at its highest closing level in over a year.
The sell-off by treasuries came after President Joe Biden directed states to make all adults eligible for a coronavirus vaccine by May 1st.
The vaccine news combined with the new $1.9 trillion stimulus package has generated optimism about the economic outlook, reducing the appeal of bonds.
Treasuries saw further downside following the release of a report from the University of Michigan showing U.S. consumer sentiment improved by much more than expected in the month of March.
The University of Michigan said its consumer sentiment index jumped to 83.0 in March after dipping to 76.8 in February. Economists had expected the index to inch up to 78.5.
With the much bigger than expected increase, the consumer sentiment index reached its highest level since hitting 89.1 in March of 2020.
A separate report released by the Labor Department released showed U.S. producer prices increased in line with economist estimates on the month of February.
The Labor Department said its producer price index for final demand climbed by 0.5 percent in February after spiking by 1.3 percent in January. The price growth matched expectations.
Excluding prices for food, energy, and trade services, core producer prices edged up by 0.2 percent in February following a 1.2 percent jump in January.
The report also showed the annual rate of growth in producer prices surged up to 2.8 percent in February from 1.7 percent in January.
Core producer prices in February were up by 2.2 percent compared to the same month a year ago, reflecting an uptick from the 2.0 percent growth in January.
The Federal Reserve’s monetary policy decision is likely to be in the spotlight next week, with traders looking for the central bank to address the recent spike in bond yields.
Traders are also likely to keep an eye on reports on retail sales, industrial production, housing starts, and regional manufacturing activity.
The material has been provided by InstaForex Company – www.instaforex.com