Treasuries Close In The Red On Upbeat Service Sector Data

(RTTNews) - After seeing considerable volatility last week, treasuries came under pressure during trading on Monday in reaction to upbeat service sector data.

Bond prices moved lower in early trading and saw some further downside following the release of data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.8 basis points to 2.64 percent.

The weakness among treasuries came following the release of a report from the Institute for Supply Management showing that activity in the U.S. service sector grew at a faster rate in the month of July.

The ISM said its non-manufacturing index jumped to 56.0 in July from 52.2 in June, with a reading above 50 indicating growth in the service sector. Economists had been expecting the index to show a more modest increase to a reading of 53.0.

With the bigger than expected increase, the non-manufacturing index rose to its highest level since a matching reading in February.

The better than expected reading on service sector activity comes after the ISM released a separate report last Thursday showing its manufacturing index at a two-year high.

Chris Low, chief economist at FTN Financial, said, "The Fed watches the ISM indices, but they are not likely to influence policy unless they translate into stronger job growth."

Trading on Tuesday may be impacted by the release of a report from the Commerce Department regarding the U.S. trade balance in the month of June. Economists expect the trade deficit to narrow to $43.0 billion in June from $45.0 billion in May. Bond traders are also likely to keep an eye on the release of the results of the Treasury Department's auction of $32 billion worth of three-year notes.