Treasuries Close Modestly Higher On Disappointing Economic Data

(RTTNews) - After ending the previous session nearly flat, treasuries moved modestly higher over the course of the trading day on Friday.

Bond prices moved to the upside in early trading and remained in positive territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 1.6 basis points to 2.257 percent.

The modest strength among treasuries was partly due to the release of some disappointing U.S. economic data, including a report from Markit showing a bigger than expected slowdown in service sector growth in the month of October.

Markit said its index of service sector activity fell to 57.3 in October from 58.9 in September, hitting its lowest level since April.

While a reading above 50 indicates continued growth in the service sector, economists had expected the index to edge down to 58.0.

"The weakened growth of new orders and downturn in business optimism suggest that growth and hiring could slow further in the coming months," said Chris Williamson, chief economist at Markit.

A separate report from the National Association of Realtors showed that pending home sales rebounded by less than expected in the month of September.

NAR said its pending home sales index inched up by 0.3 percent to 105.0 in September after falling by 1.0 percent to 104.7 in August. Economists had been expecting the index to increase by about 0.5 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Treasuries also benefited from a sell-off in the Brazilian stock market following news of the re-election of President Dilma Rousseff, who has been blamed for the country's sluggish economy.

Economic data may remain in focus on Tuesday, with traders likely to keep an eye on reports on durable goods orders, home prices, and consumer confidence.

Bond trading could also be impacted by reaction to the results of the Treasury Department's auction of $29 billion worth of two-year notes.