After initially showing a lack of direction, treasuries moved modestly higher over the course of the trading day on Friday.
Bond prices crept higher as the day progressed before moving roughly sideways going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2 basis points to 2.315 percent.
The modest strength among treasuries came as U.S. bonds followed their European counterparts higher following comments from European Central Bank President Mario Draghi indicating that the bank may broaden its asset purchases in an effort to boost inflation.
“We will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us,” Draghi said.
He added, “If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases.”
The news out of Europe came on the heels of news that China’s central bank cut its benchmark interest rates for the first time since July of 2012.
The People’s Bank of China said the one-year lending rate was reduced by 0.4 percentage points to 5.6 percent, while the one-year deposit rate was lowered by 0.25 percentage points to 2.75 percent.
The move was seen as part of an effort by the Chinese government to combat recent signs of sluggishness in the world’s second largest economy.
Peter Boockvar, managing director at the Lindsey Group, said the global monetary party will be “full on and all in” assuming Draghi follows through on government bond purchases.
While next week’s trading will be interrupted by the Thanksgiving Day holiday on Thursday, traders will be presented with a slew of economic data, particularly on Wednesday.
Reports on third quarter GDP, durable goods orders, personal income and spending, and new home sales are likely to be in focus.
The material has been provided by InstaForex Company – www.instaforex.com