Treasuries Close Modestly Higher After Yesterday's Pullback

(RTTNews) - Treasuries ended Wednesday's trading modestly higher, partly offsetting the pullback that was seen over the course of the previous session.

Bond prices showed a notable upward move in early trading but gave back some ground as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2 basis points to 2.626 percent.

The early strength among treasuries was partly due to growing concerns about the economic impact of a prolonged government shutdown, as lawmakers in Washington remain at an impasse over a temporary spending bill.

With Republicans and Democrats thus far showing little willingness to compromise, traders are becoming less optimistic that the shutdown will be short-lived.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "What's becoming more clear is that D.C. will take this impasse right up to the October 17th debt ceiling deadline, leaving markets twisting in the wind but still under the assumption that some deal will be struck."

A report from payroll processor ADP showing weaker than expected private sector job growth in the month of September also generated some buying interest.

ADP said the private sector added 166,000 jobs in September compared to a downwardly revised increase of 159,000 jobs in August.

Economists had expected private sector employment to increase by about 180,000 jobs compared to the addition of 176,000 jobs originally reported for the previous month.

With the government shutdown likely delaying the release of the Labor Department's monthly jobs report, Sal Guatieri, Senior Economist at BMO Capital Markets, said, "This means the ADP report might be our best guide to actual job growth in the month,

"Its track record is far from perfect, but the picture it paints is one of still-lackluster job creation," he added. "Business sentiment weakened ahead of the government shutdown, and a prolonged closure or payments default later this month would only sour the mood further."

Trading on Thursday may be impacted by the Institute for Supply Management's report on service sector activity, although the release of separate government reports on weekly jobless claims and factory orders has been postponed by the shutdown.