Treasuries Close Sharply Higher In Reaction To U.S. Economic Data

(RTTNews) - Extending the upward trend seen over the past two weeks, treasuries moved sharply higher over the course of the trading day on Wednesday.

Bond prices showed a strong upward move in morning trading and remained firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 10.5 basis points to 2.403 percent.

With the steep drop on the day, the ten-year yield ended the session at its lowest closing level in almost a month.

The rally by treasuries was partly in reaction to the latest batch of U.S. economic data, including a report from the Institute for Supply Management showing a notable slowdown in the pace of growth in manufacturing activity in the month of September.

The ISM said its purchasing managers index fell to 56.6 in September from 59.0 in August, although a reading above 50 indicates continued growth in the manufacturing sector. Economists had expected the index to edge down to 58.5.

Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel reflect a generally positive business outlook, while noting some labor shortages and continuing concern over geopolitical unrest."

A separate report from the Commerce Department showed an unexpected drop in construction spending in the month of August.

The report said construction spending fell 0.8 percent to a seasonally adjusted annual rate of $961.0 billion in August, while economists had expected spending to climb by 0.5 percent.

Meanwhile, payroll processor ADP released a report showing stronger than expected private sector job growth in September.

ADP said private sector employment jumped by 213,000 jobs in September following an increase of 202,000 jobs in August. Economists had been expecting an increase of about 205,000 jobs.

Geopolitical concerns also contributed to the strength among treasuries along with worries about news of the first case of Ebola diagnosed in the U.S.

Trading on Thursday could be impacted by reaction to reports on jobless claims and factory orders, although activity may be somewhat subdued ahead of the release of the more closely watched monthly jobs report on Friday.