Treasuries Close Modestly Higher After Seeing Initial Weakness

(RTTNews) - After initially moving to the downside, treasuries turned higher over the course of the trading day on Thursday on the heels of some disappointing service sector data.

Bond prices pulled back off their best levels of the day in afternoon trading but still closed modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 2 basis points to 2.606 percent.

The initial weakness among treasuries may have been partly due to the release of a report from the Labor Department showing that weekly jobless claims rose by less than expected.

However, the jobs data was quickly overshadowed by the release of a report from the Institute for Supply Management showing a bigger than expected slowdown in the pace of service sector growth.

The ISM said its non-manufacturing index dropped to 54.4 in September from 58.6 in August. While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a much more modest decrease to a reading of 57.0.

Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "The majority of the respondents' comments continue to be positive; however, there is an increase in the degree of uncertainty regarding the future business climate and the direction of the economy."

Buying interest waned in afternoon trading, however, leading some traders to cash in on the recent strength in the bond markets.

With the ongoing government shutdown postponing the release of the monthly jobs report, trading activity on Friday may be somewhat subdued.

Nonetheless, traders are likely to keep a close eye on any significant developments in Washington as well as speeches from some Federal Reserve officials.