FX.co ★ Treasuries Extend Yesterday's Significant Rebound

Treasuries recorded gains on Friday, continuing the notable recovery observed in the previous day’s trading. Early in the session, bond prices advanced significantly before retreating slightly but stayed in the positive range. Consequently, the yield on the key ten-year note, which inversely correlates with its price, decreased by 3.5 basis points, settling at 4.306 percent.

This continual decline contributed to the ten-year yield retracting further from the four-month closing peak reached last Wednesday. The momentum in Treasuries was bolstered by the Federal Reserve's widely anticipated decision on Thursday to cut interest rates by a quarter point.

Following a significant reduction of interest rates by half a percentage point in September, the Fed announced its decision to lower the target range for the federal funds rate by 25 basis points, bringing it to between 4.50 and 4.75 percent. However, Fed Chair Jerome Powell emphasized in a post-meeting press conference that future rate changes are not on "any preset course" and the central bank will decide based on each "meeting by meeting."

In the realm of U.S. economic developments, preliminary figures from the University of Michigan revealed that consumer sentiment experienced a more substantial improvement than anticipated in November. The consumer sentiment index, according to the University of Michigan, rose to 73.0 in November from 70.5 in October, exceeding the 71.0 projection by economists.

The more significant increase pushed the consumer sentiment index to its highest since reaching 77.2 in April. Regarding inflation, the report indicated a decline in year-ahead inflation expectations, which dropped to 2.6 percent in November from 2.7 percent in October, marking the lowest since December 2020. Meanwhile, long-term inflation expectations nudged upwards to 3.1 percent from 3.0 percent in October, maintaining a slight elevation compared to pre-pandemic levels.

The following week's market activity is likely to be influenced by how participants react to upcoming U.S. economic reports on consumer and producer prices, retail sales, and industrial production.