2023.10.0219:07:00UTC+00Treasuries Show Substantial Move Back To The Downside

Treasuries moved sharply lower during trading on Monday, giving back ground following the rebound seen over the two previous sessions.

Bond prices came under pressure early in the session and saw further downside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 11.0 basis points to 4.683 percent.

With the increase on the day, the ten-year yield more than offset the pullback seen to close out last week, reaching its highest closing level in almost sixteen years.

Concerns about the outlook for interest rates continued to weigh on treasuries ahead of the release of the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 163,000 jobs in September after climbing by 187,000 jobs in August, while the unemployment rate is expected to edge down to 3.7 percent from 3.8 percent.

The pullback by treasuries also came after U.S. lawmakers passed a last minute, temporary spending bill over the weekend to keep the U.S. government open.

"Over the weekend, Congress opted to kick the can down the road, passing a short-term stopgap funding bill," said Edward Moya, senior market analyst at OANDA. "This measure means the government will remain open until November 17th, providing natural disaster aid but not additional funding for Ukraine or border security."

He added, "With a temporary funding solution in place, Wall Street quickly returned to fueling the bond market selloff, which helped send the dollar higher across all its major trading partners."

On the U.S. economic front, the Institute for Supply Management released a report showing a modest slowdown in the pace of contraction in U.S. manufacturing activity in the month of September.

The ISM said its manufacturing PMI rose to 49.0 in September from 47.6 in August, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.7.

A separate report released by the Commerce Department showed construction spending in the U.S. increased in line with economist estimates in the month of August.

The Commerce Department said construction spending climbed 0.5 percent to an annual rate of $1.984 trillion in August after jumping by an upwardly revised 0.9 percent to a rate of $1,847.3 billion in July.

Economists had expected construction spending to rise by 0.5 percent compared to the 0.7 percent increase originally reported for the previous month.

Trading on Tuesday may be impacted by reaction to the Labor Department's report on job openings in the month of August.