Treasuries Move Notably Higher Following Slew Of Economic Data

(RTTNews) - Treasuries showed a strong move to the upside during trading on Wednesday, extending the rebound seen in the previous session.

Bond prices moved notably higher early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 8.1 basis points to 4.355 percent.

With the decrease on the day, the ten-year yield continued to give back ground after jumping to a one-month closing high on Monday.

The continued advanced by treasuries partly reflected optimism about the outlook for interest rates following the release of some weaker than expected U.S. economic data.

A report released by the Institute for Supply Management showed an unexpected contraction by U.S. service sector activity in the month of June.

The ISM said its services PMI slid to 48.8 in June from 53.8 in May, with a reading below 50 indicating contraction. Economists had expected the index to edge down to 52.5.

On the inflation front, the prices index dipped to 56.3 in June from 58.1 in June, indicating a modest slowdown in the pace of price growth.

"The Fed will be glad to see that the ISM Services PMI reported cooler inflation, and a little concerned that the economy seems to be losing momentum," said Bill Adams, Chief Economist for Comerica Bank. "But controlling inflation is still the Fed's number one priority."

"They are unlikely to feel comfortable enough with progress on that front to cut rates at the July decision," he added. "Even so, odds of a rate cut at the following decision in September are higher in light of June's weak ISM PMIs and rising jobless claims."

The Labor Department released a separate report showing a modest increase by first-time claims for U.S. unemployment benefits in the week ended June 29th.

The report said initial jobless claims rose to 238,000, an increase of 4,000 from the previous week's revised level of 234,000.

Economists had expected jobless claims to inch up to 235,000 from the 233,000 originally reported for the previous week.

Payroll processor ADP also released a report showing private sector employment in the U.S. increased by slightly less than expected in the month of June.

ADP said private sector employment climbed by 150,000 jobs in June after rising by an upwardly revised 157,000 jobs in May.

Economists had expected private sector employment to increase by 160,000 jobs compared to the addition of 152,000 jobs originally reported for the previous month.

Following the Independence Day holiday on Thursday, trading on Friday is likely to be driven by reaction to the Labor Department's closely watched monthly jobs report.