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Treasuries Move Sharply Lower On Positive Trade, Economic News

Extending the significant downward trend seen over the past several sessions, treasuries moved sharply lower during trading on Friday.

Bond prices moved steadily lower throughout the session before closing firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged up by 11.2 basis points to 1.903 percent.

With the substantial increase on the day, the ten-year yield jumped to its highest closing level in well over a month.

The sell-off by treasuries came as positive news on both the trade and economic fronts reduced the appeal of safe havens such as bonds.

On the trade front, China's Ministry of Commerce revealed plans to exempt U.S. agricultural products, including soybeans and pork, from additional tariffs.

China will add the agricultural products to a list of 16 types of American-made products granted tariff exemptions as a sign of goodwill ahead of the next round of trade talks.

The Commerce Ministry also said it welcomes President Donald Trump's move to temporarily delay raising the rate of tariffs on $250 billion worth of Chinese imports.

Meanwhile, Trump said he would think about an interim deal with China but would prefer a full agreement as the world's two largest economies look to end the widening trade war.

"If we're going to do the deal, let's get it done," Trump told reporters on Thursday. "A lot of people are talking about it, I see a lot of analysts are saying an interim deal — meaning we'll do pieces of it, the easy ones first."

"But there's no easy or hard. There's a deal or there's not a deal," he added. "But it's something we would consider, I guess."

In U.S. economic news, the Commerce Department released a report showing U.S. retail sales increased by more than expected in August amid a jump in auto sales.

The Commerce Department said retail sales rose by 0.4 percent in August after climbing by an upwardly revised 0.8 percent in July.

Economists had expected retail sales to rise by 0.2 percent compared to the 0.7 percent increase originally reported for the previous month.

The stronger than expected retail sales growth came as sales by motor vehicle and parts dealers spiked by 1.8 percent in August after inching up by 0.1 percent in July.

However, Andrew Hunter, Senior U.S. Economist at Capital Economics, called the jump in auto sales "suspicious looking," noting the surge in the nominal value of motor vehicle sales is "hard to square" with the 0.7 percent increase in the unit sales reported by manufacturers.

Excluding the jump in auto sales, retail sales came in unchanged in August after surging up by 1.0 percent in July. Ex-auto sales had been expected to inch up by 0.1 percent.

A separate report from the University of Michigan showed U.S. consumer sentiment has rebounded by more than expected in the month of September.

The Federal Reserve is likely to be in the spotlight next week, with the central bank widely expected to announce another interest rate cut following a two-day meeting ending on Wednesday.

The monetary policy decision may overshadow reports on industrial production, housing starts, existing home sales and regional manufacturing activity.

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