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Treasuries Move Notably Higher On Disappointing Economic Data

Treasuries moved notably higher during trading on Friday, more than offsetting the modest pullback seen over the two previous sessions.

Bond prices gave back some ground after an early move to the upside but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 3.7 basis points to 2.593 percent.

With the decrease on the day, the ten-year yield ended the session at its lowest closing level in well over two months.

The strength among treasuries came following the release of some disappointing U.S. economic data, including a Federal Reserve report showing industrial production rose by much less than expected in the month of February.

The Fed said industrial production inched up by 0.1 percent in February after falling by a revised 0.4 percent in January.

Economists had expected production to climb by 0.4 percent compared to the 0.6 percent drop originally reported for the previous month.

The uptick in production came as a spike in utilities output and an increase in mining output was largely offset by a continued drop in manufacturing output.

"The further decline in manufacturing output in February confirms that the global industrial slowdown is now weighing more heavily on U.S. producers," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "With tighter fiscal and monetary policy constraining domestic demand, the weaker external environment is another reason to expect a sustained slowdown in economic growth this year."

A separate report from the New York Fed showed an unexpected slowdown in regional manufacturing growth in the month of March.

The New York Fed said its headline general business conditions index fell to 3.7 in March after climbing to 8.8 in February.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to rise to 10.0.

The index remained below 10 for the third straight month, which the New York Fed said suggests growth has remained quite a bit slower so far this year than it was for most of 2018.

Meanwhile, preliminary data released by the University of Michigan on Friday showed a significant improvement in U.S. consumer sentiment in the month of March.

The report said the consumer sentiment index jumped to 97.8 in March from the final February reading of 93.8. Economists had expected the index to rise to 95.3.

The bigger than expected increase by the index came as more positive assessments from lower income households more than offset a drop in sentiment among households with incomes in the top third.

"Since households with incomes in the top third account for more than half of all consumer expenditures, cautious observers will conclude that the latest data are another indication that the end of the expansion is on the distant horizon," said Surveys of Consumers chief economist Richard Curtin.

He added, "While that may well be true, the current level of consumer sentiment at 97.8 hardly indicates an emerging downturn."

The Federal Reserve's monetary policy meeting is likely to be in the spotlight next week, although the central bank is widely expected to leave interest rates unchanged.

Traders are likely to keep an eye on the Fed's accompanying statement for clues about the outlook for future rate decisions.

Reports on homebuilder confidence, factory orders, and existing home sales may also attract some attention next week.

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