2018.02.1615:15:00UTC+00Treasuries Extend Recovery With Modestly Higher Close

Following the rebound seen over the course of the previous sessions, treasuries saw some further upside during trading on Friday.

Bond prices moved higher in morning trading but gave back some ground in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.4 basis points to 2.877 percent.

With the modest decrease on the day, the ten-year yield pulled back further off the four-year closing high set on Wednesday.

The continued recovery by treasuries came as traders once again shrugged off further indications of rising inflation, with a report from the Labor Department showing import prices jumped by more than expected in the month of January.

The Labor Department said import prices surged up by 1.0 percent in January after edging up by a revised 0.2 percent in December.

Economists had expected import prices to climb by 0.6 percent compared to the 0.1 percent uptick originally reported for the previous month.

The report also said export prices increased by 0.8 percent in January after inching up by a revised 0.1 percent in December.

Export prices had been expected to rise by 0.3 percent compared to the 0.1 percent drop originally reported for the previous month.

A separate report from the Commerce Department showed a much bigger than expected rebound in new residential construction in January.

The Commerce Department said housing starts soared by 9.7 percent to an annual rate of 1.326 million in January after tumbling by 6.9 percent to a revised 1.209 million in December.

Economists had expected housing starts to climb by 3.5 percent to an annual rate of 1.234 million from the 1.192 million originally reported for the previous month.

Building permits, an indicator of future housing demand, also surged up by 7.4 percent to an annual rate of 1.396 million in January from the revised December rate of 1.300 million.

The University of Michigan also released a report unexpectedly showing a significant improvement in consumer sentiment in the month of February.

The preliminary reading on the consumer sentiment index for February came in at 99.9, up from the final January reading of 95.7. Economists had expected the index to edge down to 95.5.

"Consumer sentiment rose in early February to its second highest level since 2004 despite lower and much more volatile stock prices," said Richard Curtin, the survey's chief economist.

Curtin said stock market gyrations were overshadowed by rising incomes, employment growth, and net favorable perceptions of tax reform.

Following the long, holiday weekend, next week's trading may be impacted by reaction to reports on existing home sales and weekly jobless claims as well as 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 auctions of two-year, five-year, and seven-year notes.

The Treasury is due to sell $28 billion worth of two-year notes next Tuesday, $35 billion worth of five-year notes next Wednesday and $29 billion worth of seven-year notes next Thursday.