Treasuries Close Roughly Flat As Fed Decision Looms

Markets

Treasuries showed a lack of direction over the course of the trading session on Friday before ending the day roughly flat.

Bond prices spent the day bouncing back and forth across the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by just 1.1 basis points to 3.448 percent.

With the slight decrease on the day, the ten-year yield pulled back off its highest closing level in three months.

The choppy trading on the day came as traders look ahead to the Federal Reserve’s monetary policy decision next week.

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

Meanwhile, traders largely shrugged off a report from the University of Michigan showing a modest improvement in consumer sentiment and a decrease in inflation expectations.

The University of Michigan said its consumer sentiment index inched up to 59.5 in September from 58.2 in August. With the uptick, the consumer sentiment index reached its highest level since hitting 65.2 in April.

The report also showed the recent decline in energy prices has contributed to a decrease in inflation expectations.

One-year inflation expectations dipped to 4.6 percent in September from 4.8 percent in August, while five-year inflation expectations edged down to 2.8 percent from 2.9 percent.

The Fed has indicated that its aggressive monetary policy tightening partly reflects a desire to prevent elevated inflation expectations from becoming entrenched.

The central bank’s interest rate decision is likely to be in the spotlight next week, overshadowing a large batch of housing data.

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