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Treasuries Pull Back Off Best Levels But Close Firmly Positive

After moving significantly higher in morning trading on Thursday, treasuries gave back ground over the course of the afternoon.

Bond prices pulled back well off their best levels but remained firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.8 basis points to 2.876 percent.

While the ten-year yield climbed well off its intraday low of 2.826 percent, it still ended the session at a three-month closing low.

The early strength among treasuries came amid a global stock market sell-off amid skepticism about the potential for a long-term trade agreement between the U.S. and China after the arrest of a top executive at Chinese tech giant Huawei.

Huawei CFO Meng Wanzhou was arrested in Canada on suspicion of violating U.S. trade sanctions against Iran and faces possible extradition to the U.S.

The development added to uncertainty about whether the 90-day trade truce negotiated by President Donald Trump and Chinese President Xi Jinping will give the two sides enough time to reach a long-term deal.

Traders were also reacting to a slew of U.S. economic data, as several reports originally due to be released on Wednesday were postponed due to former President George H.W. Bush's funeral.

Payroll processor ADP released a report showing private sector employment increased by less than expected in the month of November.

ADP said private sector employment climbed by 179,000 jobs in November after jumping by a downwardly revised 225,000 jobs in October.

Economists had expected an increase of about 195,000 jobs compared to the addition of 227,000 jobs originally reported for the previous month.

"Job growth is strong, but has likely peaked," said Mark Zandi, chief economist of Moody's Analytics. "This month's report is free of significant weather effects and suggests slowing underlying job creation."

He added, "With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls."

A separate report from the Labor Department showed first-time claims for U.S. unemployment benefits edged down by less than expected in the week ended December 1st.

The report said initial jobless claims slipped to 231,000, a decrease of 4,000 from the previous week's revised level of 235,000. Economists had expected jobless claims to dip to 225,000.

The Commerce Department also released a report showing the U.S. trade deficit widened to its highest level in ten years in the month of October.

The report said the trade deficit widened to $55.5 billion in October from a revised $54.6 billion in September. Economists had expected the trade deficit to widen to $55.0 billion.

Meanwhile, a report from the Institute for Supply Management unexpectedly showed an acceleration in the pace of growth in service sector activity in the month of November.

The ISM said its non-manufacturing index crept up to 60.7 in November after pulling back to 60.3 in October, with a reading above 50 indicating service sector growth. Economists had expected the index to dip to 59.2.

"The non-manufacturing sector continued to reflect strong growth in November," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "However, concerns persist about employment resources and the impact of tariffs."

Profit taking likely contributed to the afternoon pullback by treasuries as traders looked ahead to the release of the Labor Department's closely watched monthly employment report on Friday.

Employment is expected to increase by 205,000 jobs in November after jumping by 250,000 jobs in October, while the unemployment rate is expected to hold at 3.7 percent.

The jobs data is likely to overshadow separate reports on consumer sentiment, wholesale inventories, and consumer credit.

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