Treasuries Close Roughly Flat After Seeing Initial Strength

After seeing initial strength, treasuries pulled back over the course of the trading session on Wednesday before ending the day roughly flat.

Bond prices spent much of the afternoon lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.123 percent after hitting a low of 2.080.

Treasuries initially moved higher in reaction to a report from payroll processor ADP showing much weaker than expected private sector job growth in the month of May.

ADP said private sector employment edged up by 27,000 jobs in May after spiking by a downwardly revised 271,000 jobs in April.

Economists had expected employment to increase by 180,000 jobs compared to the jump of 275,000 jobs originally reported for the previous month.

“Job growth is moderating,” said Mark Zandi, chief economist of Moody’s Analytics. “Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

However, treasuries pulled back following the release of a separate report from the Institute for Supply Management showing an unexpected acceleration in the pace of U.S. service sector growth in the month of May.

The ISM said its non-manufacturing index climbed to 56.9 in May after falling to 55.5 in April, with a reading above 50 indicating growth in service sector activity.

The increase by the non-manufacturing index came as a surprise to economists, who had expected the index to come in unchanged from the previous month.

Later in the day, traders largely shrugged off the Federal Reserve’s Beige Book, which said economic activity in the U.S. expanded at a modest pace overall from April through mid-May.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, noted the assessment of the overall economy reflected a slight improvement over the slight-to-moderate growth indicated in the previous report.

Reports on the U.S. trade deficit, weekly jobless claims, and labor productivity are likely to attract some attention on Thursday, although traders may stick to the sidelines ahead of the release of the Labor Department’s more closely watched monthly jobs report on Friday.

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