After ending the previous session roughly flat, treasuries moved to the upside over the course of the trading day on Wednesday.
Bond prices moved steadily higher in morning trading and managed to remain firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to 2.10 percent.
The strength among treasuries was partly due to the release of a disappointing report on private sector employment, which raised concerns about Friday's jobs report from the Labor Department and eased worries about the Federal Reserve's stimulus program.
Payroll processor ADP said private sector employment increased by 135,000 jobs in May following a downwardly revised increase of 113,000 jobs in April. Economists had expected private sector employment to increase by about 171,000 jobs.
Joel Naroff, president and chief economist at Naroff Economic Advisors, said, "The warning from today's reports is that the Fed should think longer and harder before it does anything. Bad fiscal policy should not be matched by bad monetary policy."
"All that said, the ADP report has been off lately so Friday's employment report may not be terrible. But don't expect it to be great," he added.
The Labor Department also released a report showing weaker than previously estimated productivity growth in the first quarter, while the Commerce Department reported a smaller than expected increase in factory orders in April.
Meanwhile, traders seemed to shrug off a separate report from the Institute for Supply Management showing that growth in the service sector continued at a slightly faster rate in the month of May.
The ISM said its non-manufacturing index edged up to 53.7 in May from 53.1 in April, with a reading above 50 indicating growth in the service sector. Economists had expected the index to climb to 53.5.
Late in the trading day, the Federal Reserve released its Beige Book, a report consisting of anecdotal evidence on economic conditions in each of the twelve Fed districts.
The Beige Book said overall economic activity increased at a modest to moderate pace across all the Fed districts except the Dallas district, which reported strong economic growth.
Treasuries also benefited from a sharp pullback by stocks, with a sell-off on Wall Street and in the global markets increasing the appeal of safe havens such as bonds.
Economic data will continue to attract some attention on Thursday, with the Labor Department scheduled to release its report on weekly jobless claims.
Nonetheless, trading activity may be somewhat subdued, as traders may be reluctant to make any significant moves ahead of Friday's monthly jobs report.
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