2013.08.2316:40:00UTC+00Treasuries Close Sharply Higher On Disappointing New Home Sales Data

Treasuries moved sharply higher during trading on Friday following the release of a disappointing report on new home sales.

Bond prices showed a strong move to the upside in morning trading and remained firmly positive for the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 8.3 basis points to 2.818 percent.

The notable pullback by the ten-year yield came after it ended the previous session at its highest closing level in two years.

Treasuries benefited from the release of a Commerce Department report showing a bigger than expected drop in new home sales in July as well as a substantial downward revision to the data for June.

The report said new home sales tumbled 13.4 percent to an annual rate of 394,000 in July from the revised June rate of 455,000.

Economists had been expecting new home sales to edge down to an annual rate of 487,000 from the 497,000 originally reported for the previous month.

With the sharp drop from the previous month's downwardly revised level, new home sales are at their lowest rate since hitting 365,000 in October of 2012.

The disappointing data offset some of the recent optimism about the recovery by the housing market and eased concerns about the Federal Reserve scaling back its asset purchases at its September meeting.

Joel Naroff, president of Naroff Economic Advisors, said, "While I can say that we should not make any decision based on these numbers, the FOMC will have to use them as input into their discussions."

"The confusion at the Fed is understandable," he added. "The economic data are not all pointing to strong growth ahead, which raises questions about the desirability of starting tapering sooner rather than later."

Following this week's relatively light economic calendar, several key economic reports are scheduled to be released next week.

Reports on durable goods orders, consumer confidence, pending home sales, and personal income and spending may attract attention, with the focus likely to be on how the data impacts the Fed's thinking.