2019.01.1815:25:00UTC+00Treasuries Move To The Downside Amid Optimism About Trade

Following the pullback seen late in the previous session, treasuries saw some further downside during the trading day on Friday.

Bond prices moved lower in morning trading and remained firmly negative throughout the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.5 basis points at 2.784 percent.

The continued weakness among treasuries came amid a rally by stocks on Wall Street, as traders expressed optimism about trade talks between the U.S. and China.

Adding to the positive sentiment, a report from Bloomberg News said China has offered to go on a six-year buying spree to ramp up imports from the U.S.

An official familiar with the negotiations told Bloomberg that China would seek to reduce its trade surplus with the U.S. by increasing annual goods imports by a combined value of more than $1 trillion.

The Bloomberg report comes on the heels of yesterday's Wall Street Journal report indicating the U.S. is considering lifting tariffs on Chinese goods.

The positive news on trade overshadowed a report from the University of Michigan showing a substantial deterioration in U.S. consumer sentiment in the month of January.

The preliminary report said the consumer sentiment index plummeted to 90.7 in January from the final December reading of 98.3. Economists had expected the index to dip to 97.0.

With the much steeper than expected drop, the consumer sentiment index tumbled to its lowest level since hitting 87.2 in October of 2016.

"Consumer sentiment declined in early January to its lowest level since Trump was elected," said Surveys of Consumers chief economist Richard Curtin. "The decline was primarily focused on prospects for the domestic economy, with the year-ahead outlook for the national economy judged the worst since mid 2014."

He added, "The loss was due to a host of issues including the partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies."

Meanwhile, a separate report from the Federal Reserve showed industrial production increased by slightly more than expected in December, as jumps in manufacturing and mining output more than offset a sharp pullback in utilities output.

The Fed said industrial production rose by 0.3 percent in December after climbing by a downwardly revised 0.4 percent in November.

Economists had expected industrial production to edge up by 0.2 percent compared to the 0.6 percent advance originally reported for the previous month.

Next week, traders are likely to keep an eye on reports on existing home sales and leading economic indicators as well as any developments on the trade or government shutdown fronts.