After moving to the upside early in the session, treasuries pulled back into negative territory over the course of morning trading on Friday.
Bond prices moved roughly sideways in afternoon trading, stuck modestly below the unchanged line. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.9 basis points to 0.696 percent.
Treasuries initially benefited from their appeal as a safe haven following news that President Donald Trump and First Lady Melania Trump have tested positive for the coronavirus.
“Tonight, @FLOTUS and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this TOGETHER!” Trump said in a post on Twitter early this morning.
The news comes just a month before Election Day and led to additional uncertainty about the outcome of the presidential election.
The early strength among treasuries also came after a closely watched report from the Labor Department showed U.S. job growth slowed by much more than anticipated September is also weighing on Wall Street.
The Labor Department said non-farm payroll employment rose by 661,000 jobs in September after spiking by an upwardly revised 1.489 million jobs in August.
Economists had expected employment to increase by 850,000 jobs compared to the jump of 1.371 million jobs originally reported for the previous month.
However, treasuries turned lower as traders speculated Trump’s diagnosis and the disappointing data could put further pressure on lawmakers to pass a new stimulus bill.
House Speaker Nancy Pelosi said in an interview with CNBC that Trump’s positive test “changes the dynamic” of stimulus talks and she still believes the two sides will “find our middle ground.”
Following the slew of U.S. economic data released over the past week, the economic calendar for next week is relatively quiet.
Reports on service sector activity and the U.S. trade deficit may still attract some attention along with the minutes of the latest Federal Reserve meeting.
Bond traders are also likely to keep an eye on the results of the Treasury Department’s auction of three-year and ten-year note and thirty-year bonds.
Nonetheless, next week’s trading may be driven more by reaction to the latest developments regarding a new coronavirus relief bill.
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