Treasuries Move Modestly Higher Following Recent Weakness

(RTTNews) - Following the sell-off seen last Friday, treasuries showed a modest move back to the upside during trading on Monday.

Bond prices moved higher in early trading and managed to remain in positive territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.3 basis points to 2.591 percent.

With the modest drop on the day, the ten-year yield pulled back off the two-month closing high set in the previous session.

The early strength among treasuries came as disappointing Chinese economic data added to recent concerns about the strength of the world's second largest economy.

The Chinese National Bureau of Statistics reported weaker than expected retail sales growth in August, while a separate report showed that Chinese industrial output also rose by less than expected.

Buying interest was also generated by the release of a report from the Federal Reserve showing an unexpected drop in industrial production in the month of August.

The Fed said industrial production edged down by 0.1 percent in August after inching up by a downwardly revised 0.2 percent in July.

The modest drop came as a surprise to economists, who had expected production to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

On the other hand, the New York Federal Reserve released a report showing that business activity in the New York manufacturing sector has expanded at a robust pace in September.

The New York Fed said its headline general business conditions index surged up to 27.5 in September from 14.7 in August, with a positive reading indicating an increase in activity in the New York manufacturing sector. Economists had expected the index to edge up to 16.0.

With the much bigger than expected increase, the general business conditions index reached its highest level since hitting 32.6 in October of 2009.

Trading on Tuesday could be impacted by the release of a report on producer price inflation, although activity may be somewhat subdued as the Fed's two-day monetary policy meeting gets underway.