2019.08.1615:27:00UTC+00Treasuries Give Back Ground Following Recent Strength

After moving significantly higher over the past several sessions, treasuries gave back some ground during trading on Friday.

Bond prices climbed well off their worst levels after an early drop but remained stuck in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1 basis point to 1.539 percent.

With the modest uptick on the day, the ten-year yield rebounded after ending the previous session at its lowest closing level in three years.

The pullback by treasuries partly reflected optimism about the world's central banks providing aggressive stimulus in order to prevent a global recession.

European Central Bank official Olli Rehn helped inspire confidence after expressing the need for a significant easing package in September to support the flagging eurozone economy.

Meanwhile, traders largely shrugged off a report from the University of Michigan showing a significant deterioration in U.S. consumer sentiment in August.

The report said the consumer sentiment index tumbled to 92.1 in August after inching up to 98.4 in July. Economists had expected the index to dip to 97.2.

With the much steeper than expected drop, the consumer sentiment index slumped to its lowest level since hitting 91.2 in January.

The deterioration in consumer sentiment came amid concerns about the proposed increase in tariffs on Chinese imports as well as the reasoning behind the Federal Reserve's interest rate cut.

"The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession," said Surveys of Consumers chief economist Richard Curtin.

He added, "Consumers concluded, following the Fed's lead, that they may need to reduce spending in anticipation of a potential recession."

Curtin said consumers are likely to reduce their pace of spending but still help keep the economy out of recession at least through mid-2020.

A separate report from the Commerce Department showed an unexpected slump in housing starts in July but a sharper than expected increase in building permits.

The report said housing starts tumbled by 4.0 percent to an annual rate of 1.191 million from the revised June estimate of 1.241 million.

The drop surprised economists, who had expected housing starts to edge up by 0.3 percent to a rate of 1.257 million from the 1.253 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits spiked by 8.4 percent to a rate of 1.336 million in July from a revised 1.232 million in June.

Building permits, an indicator of future housing demand, had been expected to jump by 4.1 percent to 1.270 million from the 1.220 million originally reported for the previous month.

Following this week's deluge of data, the economic calendar for this next is relatively light, although reports on new and existing home sales may attract attention along with the minutes of the latest Federal Reserve meeting and a speech by Fed Chairman Jerome Powell.