2014.09.1916:34:00UTC+00Treasuries Regain Ground Following Recent Weakness

After seeing some early volatility, treasuries showed a notable move to the upside over the course of the trading day on Friday.

Bond prices moved roughly sideways going into the close, hovering firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.2 basis points to 2.587 percent.

With the drop on the day, the ten-year yield gave back some ground after ending the previous session at its highest closing level in over two months.

The rebound by treasuries was partly due to bargain hunting following the downward move seen on the heels of Wednesday's monetary policy announcement from the Fed.

Treasuries reacted negatively to the Fed announcement, as the central bank's latest interest rate projections seemed to suggest that some officials expect rates to be raised faster than previous anticipated.

According to the latest projections, the median estimate calls for the federal funds rate to be at 1.375 percent by the end of 2015 compared to the median projection of 1.125 percent in June.

The median projection for the federal funds rate at the end of 2016 also climbed to 2.875 percent from 2.50 percent.

For bond traders, the new projections overshadowed the fact that the Fed reiterated its pledge to keep interest rates low for a "considerable time."

Meanwhile, traders largely seemed shrug off news that Scotland voted 55 percent to 45 percent against breaking away from the United Kingdom.

"The near-term outlook for the economy on both sides of the Scottish border has brightened following Scotland's decision to remain part of the U.K.," Capital Economics said in a research note.

The firm added, "But despite the 'No' vote, the U.K. economy will continue to be buffeted by uncertainty about its political future over the next couple of years."

On the U.S. economic front, the Conference Board released a report showing that its index of leading U.S. economic indicators rose by less than expected in the month of August.

The Conference Board said its leading economic index edged up by 0.2 percent in August following an upwardly revised 1.1 percent jump in July. Economists had expected the index to climb by 0.4 percent.

Ken Goldstein, an economist at the Conference Board, said, "The leading indicators point to an economy that is continuing to gain traction, but most likely won't repeat its stellar second quarter performance in the second half."

Following several key market-moving events seen over the past week, the calendar for next week is relatively quiet.

Nonetheless, traders are likely to keep a close eye on reports on durable goods and new and existing home sales as well as speeches by several Fed officials.

Bond trading could also be impacted by the results of the Treasury Department's auctions of two-year, five-year, and seven-year notes.