Treasuries See Further Downside Despite Rate Hike Expectations

(RTTNews) - Following the significant downturn seen over the course of last Friday's session, treasuries have seen further downside during trading on Monday.

Bond prices regained some ground in the latter part of the trading day but remained firmly negative. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 3 basis points to 5.31 percent.

Earlier in the session, the ten-year yield once again surged to its highest intraday level since early April of 2002.

Treasuries continue to slump despite reduced expectations of another interest rate hike by the Federal Reserve following last week's inflation and employment data.

A closely watched Commerce Department report showed the annual rate of consumer price growth came in below economist estimates in August, while the Labor Department's monthly employment report showed much weaker than expected job growth in September.

Following the reports, CME Group's FedWatch Tool indicates the chances of the Federal Reserve raising rates by a quarter point later this month have plummeted to 23.8 percent from 70.9 percent a week ago.

On Wednesday, the Fed is scheduled to release the minutes of its latest monetary policy meeting, which may shed additional light on the outlook for rates.

Daniela Hathorn, Senior Market Analyst at Capital.com, said the continued weakness among treasuries "reinforces the idea that the long-end sell-off is being driven by more than monetary policy: elevated real yields, heavy borrowing and competition for capital continue to demand a higher term premium."

In U.S. economic news, a report released by the Institute for Supply Management showed a modest slowdown in the pace of growth in U.S. service sector activity in the month of September.

The ISM said its services PMI dipped to 54.9 in September after rising to 55.4 in August, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 55.0.