Treasuries Climb Well Off Worst Levels But Still Close Lower

After coming under pressure early in the session, treasuries regained some ground over the course of the trading day on Wednesday.

Bond prices climbed well off their early lows but still ended the day in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 2.7 basis points to 4.078 percent after hitting a high of 4.126 percent.

The ten-year yield still added to the 9.2 basis point jump seen on Tuesday, reaching its highest closing level since last November.

The early weakness among treasuries came after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating.

Fitch downgraded the U.S.’ long-term foreign-currency issuer default rating to AA+ from AAA, citing a “steady deterioration in standards of governance over the last 20 years.”

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

The move drew a strong response from the U.S., with Treasury Secretary Janet Yellen calling the change “arbitrary and based on outdated data.”

A payroll processor ADP showing U.S. private sector employment jumped by much more than expected in the month of July also weighed on treasuries amid renewed concerns about the outlook for interest rates.

ADP said private sector employment shot up by 324,000 jobs in July after surging by a downwardly revised 455,000 jobs in June.

Economists had expected private sector employment to increase by 189,000 jobs compared to the spike of 497,000 jobs originally reported for the previous month.

Reports on weekly jobless claims, labor productivity, service sector activity and factory orders may attract attention on Thursday, although trading activity is likely to be somewhat subdued ahead of the release of the Labor Department’s more closely watched monthly jobs report on Friday.

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