After initially showing a lack of direction, treasuries moved modestly lower over the course of the trading day on Friday.
Bond prices drifted lower in afternoon trading after spending the morning lingering near the unchanged line. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.8 basis points to 0.948 percent.
Traders remain optimistic lawmakers will eventually reach an agreement on a new stimulus bill, reducing the appeal of safe havens such as bonds.
In remarks on the Senate floor, Senate Majority Leader Mitch McConnell, R-Ken., said an agreement on a new relief package appears to be “close at hand” and suggested lawmakers are likely to work through the weekend to reach a deal.
House Speaker Nancy Pelosi, D-Calif., also told reporters that progress has made been toward an agreement, mirroring other recent optimistic comments from congressional leaders.
Along with agreeing on a new relief package, lawmakers also need to pass a spending bill to avoid a government shutdown. Many expect Congress to pass a short-term bill ahead of the Saturady deadline.
Upbeat news on the coronavirus vaccine front also weighed on treasuries, with an FDA advisory panel giving a positive recommendation to Moderna’s (MRNA) vaccine candidate.
Additionally, Johnson & Johnson (JNJ) said the first late-stage trial for its vaccine candidate is now fully enrolled, with the healthcare giant expecting interim data by late January.
On the U.S. economic front, a report released by the Conference Board showed its index of leading U.S. economic indicators increased by slightly more than expected in the month of November.
The Conference Board said its leading economic index rose by 0.6 percent in November after climbing by 0.8 percent in October. Economists had expected the index to increase by 0.5 percent.
“The US LEI continued rising in November, but its pace of improvement has been decelerating in recent months, suggesting a significant moderation in growth as the US economy heads into 2021,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.
Developments in Washington are likely to drive trading next week, although traders are also likely to keep an eye on reports on new and existing home sales, personal income and spending, and durable goods orders.
However, trading activity may be somewhat subdued throughout the week ahead of the Christmas Day holiday next Friday.
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