Treasuries Head Lower after Data

Reports released Friday suggested underlying economic strength

Treasury prices headed lower Friday morning after reports May Nonfarm Payrolls rose more than expected 157,000, Personal Income fell 0.1% but Expenditures rose 0.5%, the annualized PCE core deflator eased to 2.0%, the ISM index rose to 55.0, the Michigan Sentiment Index fell to 88.3 from 88.7 and Pending Home Sales fell at 3.2% annual rate.

The 10 year note was lower at 96-19/32 for a yield of 4.943%, while 30-year bonds were lower at 95-17/32 for a yield of 5.042%.

Action Economics reports that Friday's second data round was mixed though the most important ISM reading firmed slightly, offset by the decline in the NAR's PHSI index. This has left the bearish tone intact on Treasuries, however, after all the recent hedging at the long-end against a rise in yields back toward the Fed funds target area.

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