FX.co ★ Treasuries Recover From Early Weakness To Close Roughly Flat

Treasuries extended their recent downward trend in early trading on Friday but regained ground over the course of the session.

Bond prices climbed well off their early lows, eventually ending the day roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 4.146 percent after reaching a higher of 4.198 percent.

The early weakness among treasuries came as a University of Michigan report showing a substantial improvement in U.S. consumer sentiment in January reduced the safe haven appeal of bonds.

The University of Michigan said its consumer sentiment index surged to 78.8 in January after jumping to 69.7 in December. Economists had expected the index to inch up to 70.0.

With the much bigger than expected increase, the consumer sentiment index reached its highest level since hitting 81.2 in July 2021.

Selling pressure waned over the course of the session, however, as the report also showed continued decreases in both year-ahead and long-run inflation expectations.

Year-ahead inflation expectations slipped to 2.9 percent in January after plunging to 3.1 percent in December, hitting the lowest level since December 2020.

Long-run inflation expectations also edged down to 2.8 percent in January from 2.9 percent in December, falling just below the 2.9-3.1 percent range seen for 26 of the last 30 months.

The U.S. economic calendar starts relatively quiet early next week, although reports on personal income and spending, durable goods orders and fourth quarter GDP are likely to attract attention later in the week.