Treasuries Show Significant Move To The Downside

(RTTNews) - Treasuries showed a significant move to the downside during trading on Monday, more than offsetting the modest strength seen during last Friday's session.

Bond prices came under pressure early in the session and saw further downside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.9 basis points to 4.182 percent.

With the sharp increase on the day, the ten-year yield ended the session at its highest closing level in over two months.

The steep drop by treasuries came as comments from Federal Reserve officials continued to suggest the central bank plans to gradually lower interest rates in the coming months.

"If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals," Dallas Fed President Lorie K. Logan said at the Securities Industry and Financial Markets Association annual meeting.

"However, any number of shocks could influence what that path to normal will look like, how fast policy should move and where rates should settle," she added. "In my view, the FOMC will need to remain nimble and willing to adjust if appropriate."

After the Fed slashed interest rates by 50 basis points last month, CME Group's FedWatch Tool is currently indicating an 87.0 chance of just a 25 basis point rate cut next month.

Meanwhile, bond traders largely shrugged off a report from the Conference Board showing its reading on leading U.S. economic indicators fell by more than expected in the month of September.

The report said the leading economic index slid by 0.5 percent in September after falling by a revised 0.3 percent in August.

Economists had expected the leading economic index to decrease by 0.3 percent compared to the 0.2 percent dip originally reported for the previous month.

Trading activity in the bond market may be somewhat subdued on Tuesday amid a lack of major U.S. economic data.