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Treasuries Close Roughly Flat After Seeing Early Strength

After moving moderately higher in early in the session, treasuries gave back ground over the course of the trading day on Friday.

Bond prices pulled back well off their highs of the session before ending the day roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down less than a tenth of a percent to 2.455 percent after hitting a low of 2.426 percent.

Treasuries initially benefited from renewed concerns about the impact of a U.S.-China trade war after President Donald Trump followed through on his threat to raise tariffs on Chinese imports.

The U.S. hiked the tariff on $250 billion worth of Chinese goods from 10 percent to 25 percent after the U.S. and China failed to reach a trade deal by a midnight deadline.

Additionally, Trump noted in a post on Twitter that the process has begun to place tariffs on the remaining $325 billion worth of Chinese imports.

Trump praised the massive tariff payments to the U.S. Treasury and said there is "absolutely no need to rush" to reach a trade agreement with China.

However, treasuries gave back ground after Treasury Secretary Steven Mnuchin wrapped up a second day of trade talks, calling the discussions "constructive."

The pullback by treasuries reflects how sensitive the markets are to the sentiment regarding the escalating trade dispute, with traders generally still optimistic a deal will eventually be reached.

The developments on the trade front largely overshadowed a typically closely watched report from the Labor Department showing consumer prices increased by slightly less than expected in April.

The Labor Department said its consumer price index rose by 0.3 percent in April after climbing by 0.4 percent in March. Economists had been expecting another 0.4 percent increase.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent for third consecutive month compared to economist estimates for a 0.2 percent uptick.

Compared to the same month a year ago, consumer prices in April were up by 2.0 percent, reflecting a modest acceleration from the 1.9 percent growth in March.

Any news regarding trade talks could impact the markets next week, although traders are also likely to keep an eye on reports on import and exports prices, retail sales, industrial production, and housing starts.

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