Treasuries Give Back Ground Following Recent Upward Trend

(RTTNews) - After trending higher over the past few sessions, treasuries showed a notable move back to the downside on Tuesday amid the release of largely upbeat manufacturing data from the U.S. and China.

Bond prices came under pressure in early trading and saw some further downside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.7 basis points to 2.563 percent.

With the upward move on the day, the ten-year yield regained some ground after ending the previous session at its lowest closing level in almost a month.

The pullback by treasuries was partly due to the release of Chinese manufacturing data showing faster growth in the sector.

A report from the China Federation of Logistics and Purchasing and the National Bureau of Statistics showed that their reading on Chinese manufacturing activity climbed to a six-month high of 51.0 in June from 50.8 in May.

Revised estimates released by Markit and HSBC confirmed that Chinese manufacturing activity rebounded in June, with their index rising to 50.7 from 49.4.

Treasuries remained under pressure following the release of a separate report from the Institute for Supply Management showing that the U.S. manufacturing sector unexpectedly grew at a slightly slower rate in the month of June.

The ISM said its purchasing managers index edged down to 55.3 in June from 55.4 in May, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to inch up to 55.8.

Despite the modest decrease, Rob Carnell, chief international economist at ING, noted that the index continues to point to robust growth.

"Such a headline manufacturing ISM figure is consistent with GDP growth of 3.5%, and in all likelihood, the U.S. will grow a good deal faster than that in 2Q14 following the execrable 1Q14 GDP result," Carnell said.

Meanwhile, traders largely shrugged off a separate report from the Commerce Department showing that construction spending increased by much less than expected in the month of May.

Reports on private sector employment and factory orders may attract some attention on Wednesday along with remarks by Federal Reserve Chair Janet Yellen.

Nonetheless, activity may be somewhat subdued as traders look ahead to the release of the Labor Department's closely watched monthly jobs report on Thursday.