After experiencing a slight decline over the past two sessions, U.S. Treasury securities witnessed a more pronounced downturn during Tuesday's trading. Early in the session, bond prices were under pressure, maintaining a negative trajectory throughout the day. Consequently, the yield on the benchmark ten-year note, which inversely correlates with its price, rose by 6.5 basis points to reach 4.683 percent.
This day's increase positioned the ten-year yield at its highest closing level in over eight months. The persistent weakness in Treasuries can be attributed to recent U.S. economic data, heightening concerns regarding interest rate prospects.
The Institute for Supply Management (ISM) released data indicating an unexpected rise in U.S. service sector activity for December. The Services Purchasing Managers' Index (PMI) increased to 54.1 from November's 52.1, signaling growth since any reading above 50 indicates expansion. Economists had anticipated a more modest increase to 53.3.
Additionally, the report highlighted a surge in the prices index to 64.4 in December from 58.2 in November, surpassing 60 for the first time since January 2024. This sharp rise fuels concerns that inflation within the service sector might remain persistently high.
In another report from the Labor Department, it was revealed that U.S. job openings unexpectedly increased in November. Bill Adams, Chief Economist at Comerica Bank, commented that the day's data "strengthen the view that the Federal Reserve will reduce rates at a slower pace this year than was anticipated prior to the election."
As Wednesday's trading unfolds, market participants may respond to the latest U.S. economic data and the minutes from the most recent Federal Reserve meeting.
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