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After ending the previous session firmly in the red, treasuries showed a modest move back to the upside during trading on Friday.
Bond prices moved moderately higher in early trading and remained in positive territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.9 basis points to 2.503 percent.
With the drop, the ten-year yield partly offset Thursday's 3.7 basis point gain but remains above the three-month closing low set on Wednesday.
The modest strength among treasuries came on the heels of the release of the Commerce Department's report on durable goods orders in September.
While the report said durable goods orders rose by more than expected, the increase was largely due to a jump in orders for transportation equipment.
Excluding the surge in orders for transportation equipment, durable goods orders actually edged down by 0.1 percent in September compared to a 0.4 percent drop in August. The drop in ex-transportation orders came as a surprise to economists, who had been expecting a 0.5 percent increase.
The Commerce Department also said orders for non-defense capital goods excluding aircraft, which is seen as an indicator for future business spending, fell by 1.1 percent in September following a 0.4 percent drop in August.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Actual shipments of non-defense capital goods (ex. aircraft) fell by 0.2% m/m in September and the three-month-on-three-month annualized growth rate came in at -2.9%.."
"That strongly suggests third-quarter growth in business investment in equipment will also be negative or, at best, close to zero," he added. "Accordingly, we are lowering our third-quarter GDP growth estimate to 1.8% annualized, from 2.0%."
A separate report from Thomson Reuters and the University of Michigan showed that consumer sentiment deteriorated by more than previously estimated in October, reflecting concerns about the impact of the government shutdown.
Next week, the outcome of the Federal Reserve's monetary policy meeting is likely to be in focus. While the Fed is widely expected to maintain its asset purchase program in light of the government shutdown, traders will keep a close eye on any indications regarding future tapering.
Trading could also be impacted by the release of reports on retail sales, industrial production, national manufacturing activity, and consumer and producer prices.
Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of two-year, five-year, and seven-year notes.
