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Treasuries Close Notably Higher But Well Off Best Levels

After moving notably lower over the course of the three previous sessions, treasuries regained some ground during trading on Friday.

Bond prices jumped sharply in late morning trading but pulled back well off their best levels in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.5 basis points to 2.362 percent.

The ten-year yield ended the day well off its intraday low of 2.315 percent but still pulled back off the one-month closing high set on Thursday.

The late-morning rally by treasuries came on news that former National Security Adviser Michael Flynn has agreed to cooperate with prosecutors in the investigation of Russian meddling in last year's election.

Flynn pleaded guilty to lying to the FBI about conversations with the Russian ambassador, signaling that he had reached an agreement with Special Counsel Robert Mueller's team.

A report from ABC News said Flynn is prepared to testify that then-candidate Donald Trump directed him to make contact with the Russians.

However, treasuries pulled back off their best levels as Senate Majority Leader Mitch McConnell, R-Ken., declared that Republican leaders have been successful in winning over enough reluctant lawmakers to pass their tax reform bill.

"We have the votes," McConnell told reporters as he walked to the Senate floor following a Republican conference meeting.

At least fifty Republican Senators have agreed to support the bill, allowing the GOP to pass the legislation with a tie-breaking vote from Vice President Mike Pence.

The news out of Washington overshadowed a report from the Institute for Supply Management showing a modest slowdown in the pace of growth in manufacturing activity in the month of November.

The ISM said its purchasing managers index dipped to 58.2 in November from 58.7 in October, although a positive reading still indicates growth in manufacturing activity. Economists had expected the index to edge down to 58.4.

Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said faster growth in new orders and production was offset by supplier delivery improvement and declines in raw material inventory.

A separate report from the Commerce Department showed a much bigger than expected increase in construction spending in the month of October.

Developments in Washington may continue to attract attention next week, although traders are also likely to keep a close eye on the monthly jobs report due next Friday.

The jobs data is likely to overshadow reports on factory orders, service sector activity, labor productivity, and consumer sentiment.

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