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Treasuries Recover From Early Weakness To Close Little Changed

After coming under pressure early in the session, treasuries showed a notable recovery over the course of the trading day on Monday.

Bond prices climbed well off their worst levels of the day before finishing the session little changed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day unchanged at 1.520 percent after reaching a high of 1.575 percent.

Profit taking contributed to the early weakness among treasuries, as some traders cashed in on the strong upward move seen over the past several sessions.

Treasuries saw further downside after the Institute for Supply Management released a report showing an unexpected expansion in U.S. manufacturing activity in the month of January.

The ISM said its purchasing managers index surged up to 50.9 in January after slipping to a revised 47.8 in December, with a reading above 50 indicating growth in manufacturing activity.

Economists had expected the index to show a more modest increase to a reading of 48.5, which would have still indicated a contraction.

With the much bigger than expected increase, the index returned to expansion territory for the first time since July 2019.

"Global trade remains a cross-industry issue, but many respondents were positive for the first time in several months," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

Selling pressure waned over the course of the session, however, as traders continued to express concerns about the coronavirus outbreak.

The coronavirus has now killed more people in mainland China than the SARS outbreak in 2003, adding to worries about the economic impact of the rapid spread of the disease.

A report on factory orders is scheduled to be released on Tuesday but will likely to be overshadowed by any news on the coronavirus front.

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