Treasuries Close Firmly In The Red On Upbeat Manufacturing Data

(RTTNews) - Treasuries came under considerable selling pressure during trading on Friday, as upbeat manufacturing data added to the renewed uncertainty about the outlook for monetary policy.

Bond prices moved steadily lower throughout much of the session before closing firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 7.8 basis points to 2.62 percent.

The weakness among treasuries came on the heels of the release of a report from the Institute for Supply Management showing that U.S. manufacturing activity unexpectedly expanded at a slightly faster rate in the month of October.

The ISM said its purchasing managers index inched up to 56.4 in October from 56.2 in September, with a reading above 50 indicating an increase in manufacturing activity.

The modest increase came as a surprise to economists, who had expected the index of manufacturing activity to dip to 55.0.

Following Wednesday's less dovish than anticipated Federal Reserve statement, the data added to recent concerns about the outlook for the Federal Reserve's asset purchase program.

James Knightley, an economist at ING Bank, said, "In general it is a very firm report and will help keep faint thoughts of a December Fed taper alive."

"However, the apparent loss of momentum in the labor market coupled likely soft 3Q GDP number next week could quickly see them fade again," he added.

Next week, traders are likely to keep a close eye on the October jobs report due to be released on Friday, although the data may be distorted by the government shutdown.

Ahead of the jobs report, trading could be impacted by the release of reports on factory orders, service sector activity, and third quarter GDP.