Treasuries Close Sharply Lower Following Upbeat Economic Data

(RTTNews) - Treasuries moved sharply lower over the course of the trading day on Tuesday as traders reacted to the latest batch of upbeat U.S. economic data.

Bond prices showed a notable move to the downside in early trading and remained stuck firmly in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 7.6 basis points to 2.419 percent.

The steep drop by treasuries came following the release of a report from the Institute for Supply Management showing that activity in the U.S. manufacturing sector unexpectedly grew at an accelerated rate in the month of August.

The ISM said its purchasing managers index climbed to 59.0 in August from 57.1 in July, with a reading above 50 indicating growth in the manufacturing sector.

The increase by the manufacturing index came as a surprise to economists, who had expected the index to edge down to 56.8.

With the unexpected increase, the ISM said the manufacturing index rose to its highest level since reaching 59.1 in March of 2011.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The Fed may be more focused on the labor market indicators, but strength like this in the activity surveys will be hard to ignore completely. At the margin, this adds to the case for a first rate hike early next year."

A separate report from the Commerce Department showed that U.S. construction spending rebounded by more than expected in the month of July.

The report said construction spending jumped 1.8 percent to an annual rate of $981.3 billion in July after falling by 0.9 percent to a revised $963.7 billion in June. Construction spending had been expected to increase by about 1.0 percent.

Economic data is likely to remain in focus on Wednesday, with traders likely to keep an eye on reports on private sector employment and factory orders as well as the Federal Reserve's Beige Book.