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Treasuries Pull Back On Concerns Tariffs Will Drive Inflation

After moving notably higher over the course of the previous session, treasuries moved back to the downside during trading on Friday.

Bond prices came under pressure in morning trading and remained firmly negative for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 5.3 basis points to 2.857 percent.

The pullback by treasuries came amid concerns that President Donald Trump's plans to impose new tariffs on steel and aluminum imports will lead to higher inflation.

Trump indicated Thursday that he plans to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports.

The tariffs are likely to benefit U.S. steel and aluminum producers, although some officials have warned of retaliation by the European Union and China.

Trump shrugged off the concerns in a post on Twitter early Friday morning, calling trade wars "good" and "easy to win"

"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," Trump said.

He added, "Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

Following Trump's announcement, several industry groups warned that the tariffs would lead to increased costs that are passed on to consumers.

On the U.S. economic front, the University of Michigan released a report showing consumer sentiment improved by slightly less than initially estimated in the month of February.

The report said the final reading on the consumer sentiment index for February came in at 99.7 compared to the initial estimate of 99.9. Economists had expected the index to be downwardly revised to 99.5.

Despite the downward revision, the consumer sentiment index for February is still well above the final January reading of 95.7.

The Labor Department's monthly jobs report is likely to be in focus next week, potentially overshadowing reports on international trade, factory orders, and private sector employment.

Next Wednesday, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts that may shed light on the outlook for interest rates.

by RTTNews Staff Writer

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