Treasuries Move To The Upside In Reaction To Jobs Data

(RTTNews) - After moving slightly higher over the course of the previous session, treasuries saw some further upside during trading on Wednesday.

Bond prices gave back ground after an early advance but bounced back firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.9 basis points to 4.057 percent.

The continued strength among treasuries came following the release of a report from payroll processor ADP showing an unexpected decrease by private sector employment in the month of November.

ADP said private sector employment fell by 32,000 jobs in November after climbing by an upwardly revised 47,000 jobs in October.

Economists had expected private sector employment to inch up by 10,000 jobs compared to the addition of 42,000 jobs originally reported for the previous month.

The data added to recently renewed optimism the Federal Reserve will once again lower interest rates at its monetary policy meeting next week.

CME Group's FedWatch Tool is currently indicating an 89.0 percent chance the Fed will cut rates by another quarter point next week.

"This morning's ADP data confirm what a lot of the doves are saying - it's more important to focus on a weakening labor market than to worry about inflation in the 2-3% range (but still above the 2.0% target)," said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management. He added, "Although there may be some dissents at next week's Fed meeting, it is a sure thing that a 25-bps rate cut will be announced, but going forward is where things get more confusing."

Meanwhile, traders largely shrugged off a separate report from the Institute for Supply Management showing an unexpected increase by its reading on service sector activity.

The ISM said its services PMI inched up to 52.6 in November after climbing to 52.4 in October, with a reading above 50 indicating growth. Economists had expected the index to edge down to 52.1.

With the unexpected increase, the services PMI reached its highest level since hitting 53.5 in February.

Trading on Thursday may be impacted by reaction to a report on weekly jobless claims, which may shed additional light on the strength of the labor market.