Treasuries Close In The Red After Seeing Early Strength

(RTTNews) - After failing to sustain an early upward move, treasuries turned lower over the course of the trading day on Monday.

Bond prices pulled back well off their early highs and ended the day firmly in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.4 basis points to 2.218 percent after hitting a low of 2.155 percent.

With the increase, the ten-year yield closed higher for the first time in seven sessions, bouncing off the one-month closing low set last Friday.

The early strength among treasuries was partly due to news that credit ratings agency Moody's downgraded Japan's debt rating by one notch to A1 from Aa3.

Moody's said the outlook is stable but warned of heightened uncertainty over the achievability of Japan's deficit reduction goals as well as uncertainty over the timing and effectiveness of its growth enhancing policy measures.

However, treasuries moved back to the downside following the release of a report from the Institute for Supply Management showing that its index of U.S. manufacturing activity fell by much less than anticipated in the month of November.

The ISM said its purchasing managers index edged down to 58.7 in November from 59.0 in October, with a reading above 50 indicating continued growth in the manufacturing sector.

Economists had expected the ISM's manufacturing index to show a somewhat more significant decrease to a reading of 57.8.

Comments from New York Federal Reserve President William Dudley suggesting that the recent tumble by the price of oil will stimulate consumer spending also weighed on treasuries.

While the Commerce Department is scheduled to release a report on construction spending on Tuesday, trading activity may be somewhat subdued ahead of the release of more closely watched data in the coming days.