Treasuries experienced an initial rally early Monday but relinquished gains as the trading day progressed.
Bond prices, which surged early on, retracted considerably by the end of the session, ultimately closing nearly unchanged. Consequently, the yield on the benchmark ten-year note, which inversely correlates to its price, dipped by less than a basis point to 3.785 percent, after having reached a low of 3.669 percent.
The initial upswing in Treasuries was driven by concerns over a potential U.S. economic recession following last Friday's lackluster jobs report.
However, investor enthusiasm diminished after the Institute for Supply Management released data indicating that U.S. service sector activity returned to positive territory in July.
The ISM reported that its services PMI increased to 51.4 in July from 48.8 in June, with any reading above 50 signaling growth. Economists had projected the index to rise to 51.0.
“The improvement in the ISM services index might not fully allay market fears of a recession sparked by Friday’s employment data, but it supports our perspective of an economy in transition rather than one on the verge of collapse,” stated Matthew Martin, U.S. Economist at Oxford Economics.
He further noted, “The anticipation for aggressive rate cuts in September is exaggerated; we expect the Federal Reserve to implement a 25 basis point cut in the upcoming meeting.”
