Treasuries Move Sharply Lower Following Upbeat Economic Data

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Treasuries showed a substantial move to the downside during trading on Wednesday following the release of some upbeat economic data.

Bond prices moved steadily lower throughout much of the session before climbing off their worst levels going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.5 basis points to 3.161 percent.

With the sharp increase on the day, the ten-year yield more than offset the drop seen in the previous session to reach its highest closing level in over seven years.

The sell-off by treasuries came following the release of a report from payroll processor ADP showing stronger than expected private sector job growth in the month of September.

ADP said private sector employment jumped by 230,000 jobs in September after climbing by an upwardly revised 168,000 jobs in August. Economists had expected employment to increase by about 185,000 jobs.

"The labor market continues to impress," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Both the goods and services sectors soared."

"The professional and business services industry and construction served as key engines of growth," she added. "They added almost half of all new jobs this month."

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.

The report is expected to show employment climbed by about 188,000 jobs in September after jumping by 201,000 jobs in August.

A separate report from the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. service sector activity in September.

The ISM said its non-manufacturing index climbed to 61.6 in September from 58.5 in August, with a reading above 50 indicating growth in the service sector. Economists had expected the index to dip to 58.0.

With the unexpected increase, the ISM said the non-manufacturing index reached its highest level since the inception of the composite index in 2008.

"The non-manufacturing sector has had two consecutive months of strong growth since the 'cooling off' in July," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

"Overall, respondents remain positive about business conditions and the current and future economy," he added. "Concerns remain about capacity, logistics and the uncertainty with global trade."

Easing concerns about the new Italian government's spending plans may also have contributed to the weakness among treasuries.

A report from the Italian newspaper Corriere della Sera said the government expects to reduce the budget deficit from an estimated 2.4 percent of GDP in 2019 to 2.2 percent in 2020 and 2.0 percent in 2021.

Reports on weekly jobless claims and factory orders may attract attention on Thursday, although trading activity is likely to be somewhat subdued ahead of the release of the monthly jobs report on Friday.
 
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