Treasuries Close Lower After Seeing Early Strength

(RTTNews) - After moving to the upside early in the day, treasuries turned lower over the course of the trading session on Wednesday.

Bond prices pulled back well off their early highs and ended the day in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.8 basis points to 1.385 percent.

The rebound shown by the ten-year yield came after it fell to a new record intraday low of 1.336 percent in early trading.

Treasuries initially benefited from continued concerns about Britain's vote to leave the European Union, although buying interest waned shortly afterward.

The subsequent pullback was partly due to the release of a report from the Institute for Supply Management showing faster than expected growth in the U.S. service sector activity in the month of June.

The ISM said its non-manufacturing index jumped to 56.5 in June from 52.9 in May, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.3.

With the bigger than expected increase, the non-manufacturing index rose to its highest level since reaching 56.6 last November.

Andrew Hunter, Assistant Economist at Capital Economics, said, "The rebound in the ISM index reinforces our view that the U.S. economy remains on a firm footing."

"Following an acceleration to around 3% annualized in the second quarter, we still expect GDP growth to reach a solid 2% for 2016 as a whole," he added.

Treasuries remained stuck in negative territory following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes noted that participants generally thought it would be prudent to wait for the outcome of the so-called Brexit vote before making any changes to monetary policy.

Members generally agreed to wait to assess the consequences of the U.K. vote as well as for additional labor market data before assessing whether another step in removing monetary accommodation was warranted.

Following the U.K.'s vote to leave the EU, most analysts expect the Fed to remain on hold at its next meeting later this month.

Reports on private sector employment and weekly jobless claims may attract attention on Thursday, although activity may be subdued ahead of the more closely watched monthly jobs report on Friday.