Treasuries Close Modestly Higher After Seeing Early Weakness

(RTTNews) - After coming under pressure in early trading on Tuesday, treasuries showed a significant turnaround over the course of the session.

Bond prices climbed well off their early lows and managed to end the session modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by nearly a basis point to 2.483 percent after reaching a high of 2.525 percent.

The early weakness among treasuries came on the heels of the release of some upbeat economic data, including a report from the Institute for Supply Management showing that service sector activity expanded at a notably faster rate in July.

The ISM said its non-manufacturing index climbed to 58.7 in July from 56.0 in June, with a reading above 50 indicating growth in the service sector. Economists had been expecting the index to edge up to a reading of 56.5.

With the bigger than expected increase, the ISM said the non-manufacturing index reached its highest reading since the revised survey's inception in January of 2008.

A separate report from the Commerce Department showed that factory orders rebounded by more than expected in the month of June.

The data pointed to an upbeat economic outlook and added to recent speculation that the Federal Reserve may raise interest rates sooner than anticipated.

However, treasuries regained some ground over the course of the morning and accelerated to the upside in afternoon trading amid renewed geopolitical concerns.

Remarks by Polish Foreign Minister Radoslaw Sikorski indicating that Russia troops are poised to pressure or invade eastern Ukraine added to appeal of safe havens such as bond.

Amid reports of a buildup of Russian troops on the border, Sikorski told Polish news channel TVN24 Russian President Vladimir Putin could order an invasion if Ukrainian forces continue to have success in their fight against pro-Russian separatists.

Sikorski's comments came on the heels of news that Putin has ordered his government to draft a response to U.S. and European sanctions.

A pullback by U.S. stocks in response to the news regarding the Ukrainian conflict also likely contributed to the rebound by treasuries.

Developments overseas are likely to remain in focus on Wednesday, although traders are also likely to keep an eye on a report on U.S. trade in the month of June.