NEW YORK: US Treasury yields edged lower on Wednesday as a spate of economic data offered scant clarity on the health of the US economy or how quickly the Federal Reserve may proceed with another interest rate increase.
Bond yields, which move in the opposite direction of their prices, were contained to a tight range but slid slightly in afternoon trading as US equities and oil fell.
"It's been a back and forth day and we're holding some small gains here as equity weakness and oil reversing gains have helped the market a little bit," said Cantor Fitzgerald Treasury analyst Justin Lederer. "All in all we've traded on either side of yesterday's closing levels."
Yields fell after a weaker-than-expected reading of US private-sector hiring but retraced that after stronger-than-expected US trade, manufacturing and services data.
At one point after the ADP National Employment Report, which showed April had the weakest private-sector job growth in three years, yields on benchmark 10-year Treasuries touched their lowest since April 20.
By late morning, following firmer readings on factory orders and activity in the services sector, the 10-year yield had edged back up to near its levels of late Tuesday. The 10-year note was last up 5/32 in price to yield 1.780 percent. Yields across the curve hovered just below late Tuesday's levels.
Of particular note for bond investors, the Institute for Supply Management's non-manufacturing index for April featured the first increase in the report's prices paid index so far this year and the strongest reading since May 2015.
The index can flag growing inflation pressures in the vast services sector and could offer fodder for the Fed's case to raise rates sooner than later.
FTN Financial economist Jay Morelock said the positive services data, coupled with the rise in factory orders and a trade deficit at the lowest in more than a year, was challenging some traders' perceptions that the Fed would not lift its benchmark rate at its next policy meeting in June.
"The service sector is so important to the US economy," Morelock said.
Interest rate futures markets imply only a 13 percent probability that the Fed will raise the federal funds target rate at its June meeting, according to CME Group's FedWatch site. The first meeting to sport a better-than-50 percent probability for a hike is December.
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