Ten-Year Yield Surges To Nearly Three-Month High

(RTTNews) - Following the rebound seen in the previous session, treasuries showed a substantial move back to the downside during trading on Tuesday.

Bond prices fell sharply in early trading and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged 14.7 basis points to 3.340 percent.

The ten-year yield more than offset the 7.2 basis point drop seen last Friday, ending the session at its highest closing level in almost three months.

The sharp pullback by treasuries came as traders continued to express concerns about the outlook for interest rates ahead of comments from several Federal Reserve officials, including Fed Chair Jerome Powell, as well as the central bank's Beige Book.

Adding to the worries about interest rates, the Institute for Supply Management released a report showing service sector activity in the U.S. unexpectedly grew at a slightly faster rate in the month of August.

The ISM said its services PMI inched up to 56.9 in August from 56.7 in July, with a reading above 50 indicating growth in the sector. The uptick surprised economists, who had expected the index to dip to 55.1.

The report is a positive sign for the economy but led to concerns the Fed will see the data as an indication that it can continue to aggressively raise interest rates.

Looking ahead, reaction to remarks by Fed officials, the Beige Book and a report on the U.S. trade deficit may drive trading on Wednesday.