By Sunny Oh

10-year Treasury yield continues to plummet below 2.30%

Treasury yields on Friday extended their downward trend, as a batch of economic reports came in mixed ahead of an abbreviated session due to the Memorial Day holiday.

Government paper has drawn bidders lately, pushing yields lower, over the past weeks amid questions about the strength of U.S. economic growth and concerns about probes in President Donald Trump's administration, which could alter his inflation-boosting policy plans.

The yield for the 2-year Treasury note lost 0.4 basis point to 1.294%. The 10-year note slipped 1.5 basis point to 2.240%, while the 30-year bond dropped 1.8 basis point to 2.902%.

Prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.

The Securities Industry and Financial Markets Association recommends bond markets should close at 2 a.m. Eastern on Friday and the bond market will be closed on Monday for the holiday.

Economic data on Friday showed the pace of growth in the first quarter wasn't as bad as an initial read.The government raised growth estimates from 0.7% to 1.2%, while the personal-consumption expenditure index, the Fed's preferred measure of inflation, was unchanged at 2.4%. Meanwhile, durable-goods orders fell 0.7% in April, a 5-month low (http://www.marketwatch.com/story/orders-for-durable-goods-fall-to-5-month-low-2017-05-26). Meanwhile, the University of Michigan reported consumer sentiment has ticked up to 97.1 points in May.

The data offered little reason for traders to change their posture going into the extended holiday weekend, but still offered a somewhat muted view of the U.S. economy.

Analysts highlighted a worrisome decline in corporate profits for the first time in three quarters by a 2.5% annual rate, after climbing 2.3% in the fourth quarter of 2016. And the shipment of capital goods unrelated to defense spending fell by 0.1% in April after having risen 0.2% in March, strategists said.

That's "a possible harbinger of weak growth in the second quarter," said Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets, in a note.

Still, some found reasons for optimism.

"We're not at the beginning, and we're not anywhere near the end," said Sharon Stark, a fixed-income strategist for boutique investment bank Incapital. She pointed out the recent strength in business and consumer-confidence indexes suggested the U.S. economy was unlikely to be at the final innings of the business cycle.

See: Economy wasn't as bad as it looked in first quarter, GDP shows (http://www.marketwatch.com/story/economy-wasnt-as-bad-as-it-looked-in-first-quarter-gdp-shows-2017-05-26)

Meanwhile, St. Louis Fed President James Bullard, a nonvoting member of the central bank's interest-rate setting committee, maintained his dovish stance on Thursday night, saying the target level for its benchmark short-term interest rate was "very close" to where it should be.

On Wednesday, minutes from the Fed's recent minutes suggested that the central bank planned on continuing on their path toward normalizing monetary policy, but said they would pivot if coming data continued to demonstrate weakness.

(END) Dow Jones Newswires

May 26, 2017 11:43 ET (15:43 GMT)

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