Treasuries Pull Back Off Best Levels But Close Modestly Higher

Treasuries initially extended the strong upward move seen over the two previous sessions but gave back ground over the course of the trading day on Friday.

Bond prices pulled back well off their best levels but managed to close modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to 3.380 percent after hitting a six-month intraday low of 3.295 percent.

The early strength in the bond market came as treasuries benefited from their appeal as a safe haven amid renewed concerns about the health of the banking sector.

U.S.-listed shares of Deutsche Bank (DB) moved sharply lower in early trading amid a spike by the German lender’s credit default swaps.

Credit Suisse (CS) and UBS Group (UBS) also came under pressure after a report from Bloomberg said they are among banks under scrutiny in a Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions.

UBS’ state-backed acquisition of troubled rival Credit Suisse for 3 billion Swiss francs, or $3.2 billion, helped ease concerns about recent banking industry turmoil earlier this week.

Buying interest waned over the course of the session, however, as stocks on Wall Street staged a significant recovery from early weakness, leading some traders to move money out of bonds.

On the U.S. economic front, the Commerce Department released a report showing a continued slump in orders for transportation equipment led to an unexpected decrease in new orders for U.S. manufactured durable goods in the month of February.

The Commerce Department said durable goods orders slid by 1.0 percent in February after plummeting by a revised 5.0 percent in January.

Economists had expected durable goods orders to increase by 0.6 percent compared to the 4.5 percent plunge that had been reported for the previous month.

Excluding the steep drop in orders for transportation equipment, durable goods orders were unchanged in February after rising by 0.4 percent in January. Ex-transportation orders were expected to inch up by 0.2 percent.

The economic calendar for next week is relatively quiet, although traders are likely to keep an eye on reports on consumer confidence, pending home sales and personal income and spending.

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