Treasuries Pull Back Off Early Highs To Close Roughly Flat

(RTTNews) - Treasuries extended their recent rally early in the session on Monday but gave back ground over the course of the trading day.

Bond prices pulled back well off their early highs before ending the day roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 3.785 percent after hitting a low of 3.669 percent.

Treasuries initially moved to the upside amid concerns about the U.S. economy slipping into recession following last Friday's disappointing jobs report.

However, buying interest waned following the release of a report from the Institute for Supply Management showing service sector activity in the U.S. turned positive in the month of July.

The ISM said its services PMI climbed to 51.4 in July from 48.8 in June, with a reading above 50 indicating growth. Economists had expected the index to rise to 51.0.

"The uptick in the ISM services index will do little to reverse market jitters of a recession in the wake of Friday's employment report, but it aligns with our view of an economy in transition rather than one on the brink of collapse," said Matthew Martin, U.S. Economist at Oxford Economics.

He added, "Expectations for aggressive rate cuts in September are overdone, and we expect the Fed to move forward with a 25bps cut at the meeting."