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Treasuries Pull Back Well Off Best Levels But Close Modestly Higher

After seeing initial strength, treasuries pulled back near the unchanged line over the course of morning trading on Friday but managed to finish the day modestly higher.

Bond prices moved roughly sideways throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 2.393 percent after hitting a low of 2.364 percent.

Treasuries initially benefited from their appeal as a safe haven amid lingering concerns about the escalating trade dispute between the U.S. and China.

President Donald Trump has sought to blame China for backing out of a nearly completed trade deal, although a spokesperson for China's Ministry of Commerce claims the U.S. is responsible for serious setbacks in the trade talks.

Commerce Ministry spokesperson Gao Feng accused the Trump administration of "bullying behavior" with a recent increase in tariffs, according to state-run Chinese news agency Xinhua.

"It is regrettable that the U.S. side unilaterally escalated trade disputes, which resulted in severe negotiating setbacks," Gao said.

He added, "We urge the U.S. side to correct wrongdoings as soon as possible to avoid causing heavier damages to businesses and consumers in both countries and dragging down the global economy."

However, concerns about trade waned after the Trump administration officially delayed imposing tariffs on imported automobiles and parts for up to six months, confirming media reports from earlier this week.

A White House statement noted Trump has directed U.S. Trade Representative Robert Lighthizer to negotiate agreements to address the national security threat posed by auto imports.

"United States defense and military superiority depend on the competitiveness of our automobile industry and the research and development that industry generates," White House Press Secretary Sarah Sanders said.

She added, "The negotiation process will be led by United States Trade Representative Robert Lighthizer and, if agreements are not reached within 180 days, the President will determine whether and what further action needs to be taken."

On the U.S. economic front, the University of Michigan released a report showing a substantial improvement in consumer sentiment in May, although the data was recorded mostly before trade negotiations with China collapsed.

The preliminary report showed the consumer sentiment index surged up to 102.4 in May from 97.2 in April, reaching its highest level in fifteen years. Economists had expected the index to inch up to 97.5.

The economic calendar for next week is relatively light, although traders likely to keep an eye on reports on new and existing home sales and durable goods orders are as well as the minutes of the latest Federal Reserve meeting.

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