U.S. Treasury Prices Hold Steady

By Akane OtaniFeaturesDow Jones Newswires

U.S. government bond prices held steady Wednesday, showing signs of stabilization after a recent selloff.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.332%, unchanged from Tuesday. Yields fall as bond prices rise.

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Treasury yields have climbed in recent sessions, as investors have increasingly bet that the Federal Reserve will raise interest rates for a third time in 2017. Hopes of Republicans passing a tax-cuts package and boosting economic growth also sent bond yields higher toward the end of September. Yields rise as bond prices fall.

Yet the selling stalled Wednesday. Treasury yields drifted near the flat line in afternoon trading after jumping earlier in the session, when data showed service sector activity across the U.S. accelerated in September.

The Institute for Supply Management's index for nonmanufacturing activity, which tracks industries including health care, finance, agriculture and construction, rose to 59.8 last month, the highest reading since August 2005. Economists surveyed by The Wall Street Journal had expected a reading of 55.2 for September.

The upbeat data softened demand for Treasurys, which tend to rise when investors are less confident about the economic environment.

Earlier, a report showed hiring at private U.S. employers grew less than expected in September. Firms across the country added 135,000 workers to their ranks last month, according to payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics, compared with the 150,000 economists surveyed by The Wall Street Journal had expected.

Some analysts cautioned against taking too much stock in the day's ADP reading. The data can be volatile, they noted, and aren't always a reliable predictor of the U.S. Bureau of Labor Statistics' widely watched monthly jobs report, which investors will get a look at this Friday.

Economists are expecting to see nonfarm payrolls rise by 80,000 in September, down from 156,000 the prior month.

Meanwhile, trading in the Treasurys market is likely to remain muted, investors and analysts say, noting that bond yields have hovered near where they ended last week.

Bond yields have remained in a relatively narrow range in recent months, even as investors have contended with the prospect of a tax-overhaul package and a potential change in leadership at the Federal Reserve next year.

One of the possible candidates, former Fed governor Kevin Warsh, is seen by some investors as likely to be more hawkish than current Fed Chairwoman Janet Yellen -- something that could put pressure on government bonds if he is appointed.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

October 04, 2017 16:36 ET (20:36 GMT)