Treasuries Show Modest Move Back To The Upside

Following the sharp pullback seen last Friday, treasuries showed a modest move back to the upside during trading on Monday.

Bond prices gave back some ground after an early advance but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.4 basis points to 2.034 percent.

Treasuries benefited from bargain hunting following the sell-off seen in the previous session, when the ten-year yield surged up by 9.5 basis points.

While last Friday's strong jobs data has dented optimism about a near-term interest rate cut, the Federal Reserve is still expected to lower rates eventually.

CME Group's FedWatch Tool still points to a rate cut at the next Federal Reserve meeting later this month, although expectations have dramatically shifted toward a 25 basis point cut rather than a 50 basis point cut.

The shift comes after the Labor Department's closely watched report showed employment jumped by 224,000 jobs in June compared to expectations for an increase of 160,000 jobs.

In light of the focus on the outlook for rates, trading activity was somewhat subdued ahead of Fed Chairman Jerome Powell's congressional testimony later this week.

Powell is due to testify before the House Financial Services Committee on Wednesday and before the Senate Banking Committee on Thursday.

Wednesday will also see the release of the minutes of the Fed's last monetary policy meeting, which may shed additional light on the central bank's decision to make notable changes to its accompanying statement.

Powell is scheduled to deliver opening remarks at a Boston Fed conference on "Stress Testing" on Tuesday but may refrain from directly addressing interest rates.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $38 billion worth of three-year notes.

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