Treasuries Give Back Ground After Recent Upward Trend

(RTTNews) - Treasuries moved moderately lower over the course of the trading day on Tuesday, giving back some ground after trending higher for much of the past month.

After seeing some initial weakness, bond prices saw further downside over the course of the trading day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 2.646 percent.

The pullback by treasuries came as traders largely shrugged off concerns about the economic impact of the government shutdown that took effect at midnight.

While lawmakers have thus far not shown much willingness to compromise, traders seemed to be expressing optimism that the shutdown will be short-lived.

Selling pressure was also generated by the release of a report from the Institute for Supply Management showing an unexpected increase by its index of national manufacturing activity.

The ISM said its purchasing managers index edged up to 56.2 in September from 55.7 in August, with a reading above 50 indicating growth in the manufacturing sector. Economists had been expecting the index to dip to 55.0.

With the unexpected increase, the index of activity in the manufacturing sector rose to its highest level since April of 2011.

"Overall, a very encouraging report," said Amna Asaf, an economist at Capital Economics. "The headline index is roughly consistent with annualized GDP growth in the third quarter of between 2.5% and 3.0%, which would be slightly better than the second quarter's 2.5%."

Trading on Wednesday could be impacted by any significant developments in Washington, although traders are also likely to keep an eye on ADP's report on private sector employment.