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Treasuries Close Nearly Flat Following Choppy Trading Day

After ending the previous session notably higher, treasuries showed a lack of direction over the course of the trading day on Friday.

Bond prices spent the day bouncing back and forth across the unchanged line before closing nearly unchanged. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.893 percent.

The choppy trading on the day came as traders digested recent volatility in the bond market, which saw treasuries rebound strongly on Thursday after falling sharply earlier in the week.

Optimism about a potential coronavirus vaccine weighed on treasuries early in the week, while concerns about the recent spike in new cases contributed to the yesterday's recovery.

Traders largely shrugged off a report from the University of Michigan showing an unexpected decrease in U.S. consumer sentiment in the month of November.

The preliminary report said the consumer sentiment index fell to 77.0 in November after rising to a seven-month high of 81.8 in October. The pullback came as a surprise to economists, who had expected index to inch up to 82.0.

"The outcome of the presidential election as well as the resurgence in covid infections and deaths were responsible for the early November decline," said Surveys of Consumers chief economist Richard Curtin

"Interviews conducted following the election recorded a substantial negative shift in the Expectations Index among Republicans, but recorded no gain among Democrats," he added. "It is likely that Democrats' fears about the covid resurgence offset gains in economic expectations."

The Labor Department released a separate report showing producer prices increased by slightly more than anticipated in the month of October.

The Labor Department said its producer price index for final demand rose by 0.3 percent in October after climbing by 0.4 percent in September. Economists had expected prices to inch up by 0.2 percent.

The bigger than expected increase in producer prices was partly due to a jump in food prices, which surged up by 2.4 percent in October amid a spike in prices for fresh and dry vegetables.

Excluding food and energy prices, core producer prices crept up by 0.1 percent in October after rising by 0.4 percent in September. Core prices were expected to edge up by 0.2 percent.

Next week's trading may be impacted by reaction to the latest economic data, including reports on retail sales, industrial production, homebuilder confidence, housing starts, existing home sales and regional manufacturing activity.

Traders are also likely to keep an eye on the latest developments regarding the coronavirus pandemic, including potentially new restrictions and lockdowns.

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