Amid early session uncertainty, Treasury markets experienced a modest decline during Friday's trading. Initial stability in bond prices gave way to a downward shift as the day progressed, culminating in a tangible drop by afternoon. The yield on the benchmark ten-year note, which inversely relates to its price, rose by 3.2 basis points to reach 4.232 percent. This uptick partially counterbalanced Thursday's decline of 4.2 basis points, though it closed below Wednesday's near three-month peak.
The initial volatility was driven by mixed economic signals from the U.S., notably in consumer sentiment and durable goods orders. The University of Michigan adjusted its consumer sentiment index for October upwards to 70.5, surpassing a preliminary estimate of 68.9. Analysts anticipated a modest revision to 69.0. This adjustment positions the index slightly above September’s final figure of 70.1 and marks a three-month upward trend, peaking at its highest since April's 77.2.
Conversely, the Commerce Department detailed a sharper than anticipated drop in durable goods orders for September, largely due to continuing weakness in transportation equipment orders. Orders decreased by 0.8 percent, aligning with a revised decline in August. This was contrary to economist projections of a 0.5 percent fall, following a previously unchanged report for the prior month. However, when stripping out the steep 3.1 percent decline in transportation equipment orders, durable goods orders increased by 0.4 percent in September, after a 0.6 percent rise in August. Expectations were for a minor dip of 0.1 percent in ex-transportation orders.
As the session unfolded, selling pressure emerged due to persistent trader concerns that the Federal Reserve might decelerate its rate-cutting trajectory. Although a quarter-point rate cut is widely anticipated next month, CME Group's FedWatch Tool suggests a 24.0 percent probability that rates will hold steady in December.
The upcoming week will likely hinge on reactions to the monthly employment report and data on personal income and spending, encompassing the Fed's preferred inflation metrics. Additionally, insights into consumer confidence, pending home sales, and manufacturing activity might also garner attention.
