Treasuries Come Under Pressure After Seeing Initial Strength

After failing to sustain an initial move to the upside, treasuries came under pressure over the course of the trading session on Monday.

Bond prices pulled back well off their early highs and firmly into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 2.682 percent.

With the turnaround on the day, the ten-year yield climbed further off the more than eleven-month closing low set last Thursday.

The pullback by treasuries came as stocks on Wall Street moved notably higher amid optimism about high-level trade talks between the U.S. and China in Beijing.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the U.S. team at the two-day meeting that began today, with a spokesman for China’s Foreign Ministry predicting “positive and constructive discussions.”

Meanwhile, traders largely shrugged off a report from the Institute for Supply Management showing growth in U.S. service sector activity slowed by more than anticipated in the month of December.

The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.

“The non-manufacturing sector’s growth rate cooled off in December,” said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. “Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China.”

Amid a quiet day on the U.S. economic front on Tuesday, bond traders are likely to keep an eye on the results of the Treasury Department’s auction of $38 billion worth of three-year notes.

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