Treasuries Move Notably Higher Following Disappointing Service Data

(RTTNews) - With traders reacting to a disappointing report on service sector activity, treasuries showed a notable move to the upside during trading on Tuesday.

Bond prices showed a strong upward move in morning trading before moving roughly sideways in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.3 basis points to 1.543 percent.

The strength among treasuries came following the release of a report from the Institute for Supply Management showing that service sector growth slowed to its lowest rate in over six years in the month of August.

The ISM said its non-manufacturing index tumbled to 51.4 in August from 55.5 in July, falling to its lowest level since February of 2010.

While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a much more modest drop to 55.0.

"According to the NMI, 11 non-manufacturing industries reported growth in August," said Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee.

He added, "The majority of the respondents' comments indicate that there has been a slowing in the level of business for their respective companies."

On the heels of last Friday's monthly jobs data, the ISM report was seen as further reducing the likelihood that the Federal Reserve will raise interest rates later this month.

Trading on Wednesday may be impacted by reaction to the Fed's Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.