Treasuries saw considerable weakness during trading on Friday, as news of an agreement among European leaders eased concerns about the ongoing debt crisis.
Bond prices moved sharply lower in early trading and remained stuck firmly in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.2 basis points to 1.659 percent.
The weakness among treasuries came after European Council President Herman Van Rompuy announced that European leaders have agreed to spend 120 billion euros on a package of measures to stimulate growth and create jobs.
Van Rompuy said the leaders also agreed to permit the European Financial Stability Facility and the European Stability Mechanism to directly recapitalize ailing banks after a single European banking regulator is commissioned.
Additionally, the leaders agreed that ESM loans to Spanish banks will not have senior creditor status. The European Central bank is set to act as an agent for the rescue funds in market operations.
Peter Boockvar, managing director at Miller Tabak, said, "The next question is whether the ESM/EFSF will have enough capital and assuming they don't, will the ECB chip in by giving it a bank license thus leveraging its size. That is yet to be determined."
"For now, party on and turn that hour glass over as more time has been bought but only the symptoms are being fought as the underlying disease of excessive debt and lack of growth still remains," he added.
Meanwhile, traders largely shrugged off a mixed batch of U.S. economic data, including a report from Thomson Reuters and the University of Michigan showing that consumer sentiment deteriorated by even more than previously estimated in the month of June.
The report showed that the consumer sentiment index for June was downwardly revised to 73.2 from the mid-month reading of 74.1. With the downward revision, the consumer sentiment index is down sharply compared to the nearly five-year high of 79.3 seen in May.
A separate report from the Institute for Supply Management - Chicago showed that Chicago-area business activity saw a modest acceleration in the pace of growth in the month of June, with the Chicago business barometer inching up to 52.9 in June from 52.7 in May
While trading activity may be somewhat subdued next week due to the Independence Day holiday, investors are likely to keep a close eye on the monthly employment report on Friday.
In the days leading up to the report, trading could be impacted by the release of reports on manufacturing activity, construction spending, and factory orders.
by RTT Staff Writer
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