U.S. Treasuries slump on higher revised GDP, Yellen speech eyed

The U.S Treasuries slumped on Friday after data showed that U.S. economy grew but at less than expected rate of 0.8 percent annual pace in the first quarter. Moreover, investors await Federal Reserve Chair Janet Yellen's speech that is likely to clear the air on Fed's stance on interest rate hike. The yield on the benchmark 10-year Treasury note rose 1bp to 1.834 pct and the yield on the short-term 2-year bonds climbed 1bp to 0.879 percent by 1245 GMT.

The preliminary 1Q16 GDP increased 0.8 percent, advanced 0.5 percent, just below market expectations for a 0.9 percent, from unrevised 1.4 percent reading seen in last quarter of 2015. Similarly, personal consumption increased 1.9 percent, as compared to 2.4 percent in the last quarter and core PCE jumped 2.1 percent, following the +1.3 percent increase seen in 4Q15. On the other hand, exports decreased 2.0 percent in the first quarter of 2016, alongside a 0.2 percent decrease from imports.

On the other hand, investors shrug off the current weakness in the crude oil markets and moved out from safe-haven buying. The U.S bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Federal Reserve's target. Today, crude oil prices fell more than 1 percent to below $50 mark after investors booked profit, as they considered whether higher prices could unlock more output in an already oversupplied market.  

Yesterday, crude oil prices crossed $50 mark for first time in seven months after the U.S. government reported a larger-than-expected drop in crude inventories. According to the US DOE, crude inventories decreased 4.2 million barrels, as compared to a build of +1.3 million barrels seen prior for the week ending 20 May.

This came alongside an increase seen in gasoline inventories of +2.0 million barrels, from a draw of -2.5 million barrels seen prior and a decrease in distillate inventories of -1.3 million barrels, against a draw of -3.2 million barrels. The International benchmark Brent futures fell 1.49 pct to $48.84 and West Texas Intermediate (WTI) dipped 1.01 pct to $48.98 by 1300 GMT.

Markets now look ahead to final May revisions for University of Michigan consumer sentiment as markets now move towards the holiday weekend. Meanwhile, S&P 500 Futures rose 0.02 pts to 2,090.25 by 1300 GMT.