Treasuries Move Modestly Lower Amid Lingering Interest Rate Worries

After extending yesterday’s lackluster performance in morning trading, treasuries moved modestly lower over the course of the trading day on Wednesday.

Bond prices moved to the downside after ending the previous session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 3.133 percent.

The modest weakness among treasuries reflected lingering concerns about higher interest rates following some hawkish comments from Federal Reserve officials.

In remarks earlier this morning, Cleveland Federal Reserve President Loretta Mester said she expects the Fed to raise interest rates above 4 percent by early next year.

Mester also said she does not anticipate the Fed cutting interest rates in 2023, with the central bank likely to keep rates at an elevated level in an effort to combat inflation.

Meanwhile, payroll processor ADP released a report showing private sector employment in the U.S. increased by much less than expected in the month of August.

ADP said private sector employment rose by 132,000 jobs in August after jumping by nearly 270,000 jobs in July. Economists had expected employment to surge by 288,000 jobs.

“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy‘s conflicting signals,” said ADP chief economist Nela Richardson. “We could be at an inflection point, from super-charged job gains to something more normal.”

ADP suspended its jobs report for June and July as the firm revamped its methodology and entered into a partnership with the Stanford Digital Economy Lab.

Reports on weekly jobless claims, manufacturing activity and construction spending are likely to attract attention on Thursday, although trading activity may be somewhat subdued ahead of Friday’s monthly jobs report.

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