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Treasuries Give Back Ground Following Yesterday's Rally

Following the rally seen in the previous session, treasuries gave back some ground over the course of the trading session on Wednesday.

Bond prices showed a lack of direction in morning trading but came under pressure in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.8 basis points to 2.108 percent.

The rebound by the ten-year yield on the day came after it tumbled to its lowest closing level in nearly ten months on Tuesday.

Treasuries moved to the downside in afternoon trading following news President Donald Trump agreed to support a measure that would raise the debt ceiling and fund the government for three months.

The short-term debt limit and government funding measure would be attached to a bill providing aid for victims of Hurricane Harvey.

House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., released a statement announcing the agreement on the combined bill after meeting with Trump.

The statement by Pelosi and Schumer came even though House Speaker Paul Ryan, R-Wis., attacked the idea of a short-term debt limit increase just hours earlier.

Speaking to reporters, Ryan described a Democratic plan to combine a Hurricane Harvey aid package with a short-term debt limit increase as "ridiculous and disgraceful" as well as "unworkable."

Trump confirmed the agreement in remarks to reporters aboard Air Force One as he traveled to North Dakota for a tax reform event.

Earlier in the day, treasuries showed a lack of direction amid uncertainty ahead of the European Central Bank's monetary policy meeting on Thursday.

On the U.S. economic front, the Institute for Supply Management released a report showing a rebound in the pace of growth in service sector activity in the month of August.

The ISM said its non-manufacturing index climbed to 55.3 in August after falling to 53.9 in July, with a reading above 50 indicating growth in the service sector. Economists had expected the index to rebound to 55.8.

A separate report released by the Commerce Department showed the trade deficit came in slightly wider in the month of July.

The Commerce Department said the trade deficit widened to $43.7 billion in July from a revised $43.5 billion in June. Economists had expected the deficit to widen to $44.6 billion.

Meanwhile, the Federal Reserve released its Beige Book, which said economic activity expanded at a modest to moderate pace across all twelve districts in July and August.

The ECB's monetary policy announcement is likely to be in focus on Thursday, although the central bank is widely expected to leave interest rates unchanged and maintain its asset purchase program.

Trading could also be impacted by reaction to a report on weekly jobless claims as well as revised data on labor productivity and costs in the second quarter.

The Treasury Department is also due to announce the details of next week's auctions of three-year and ten-year notes and thirty-year bonds.

by RTTNews Staff Writer

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