After ending the previous session roughly flat, treasuries showed a significant move to the downside during trading on Thursday.
Bond prices moved sharply lower early in the session and remained firmly negative throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 10.6 basis points to 1.565 percent.
The sell-off by treasuries came on the heels of news that the U.S. and China plan to hold high level trade talks in early October.
A statement from China’s Commerce Ministry said both sides agreed to the new round of talks during a phone call between Chinese Vice Premier and chief trade negotiator Liu He and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
“Both sides agreed they should work together and take practical actions to create favorable conditions for the negotiations,” China’s Commerce Ministry said, according to a CNBC translation.
A spokesperson for the U.S. Trade Representative’s office confirmed the phone call and said the U.S. and China agreed to hold meetings “in the coming weeks.”
U.S. and Chinese officials will purportedly hold deputy-level talks later this month in preparation for the meeting in October.
Treasuries saw further downside after a report from payroll processor ADP showed stronger than expected private sector job growth in August.
The report said private sector employment surged up by 195,000 jobs in August after climbing by a downwardly revised 142,000 jobs in July.
Economists had expected employment to increase by about 149,000 jobs compared to the addition of 156,000 jobs originally reported for the previous month.
“Businesses are holding firm on their payrolls despite the slowing economy,” said Mark Zandi, chief economist of Moody’s Analytics. “Hiring has moderated, but layoffs remain low. As long as this continues recession will remain at bay.”
On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.
Employment is expected to increase by 158,000 jobs in August after climbing by 164,000 jobs in July, while the unemployment rate is expected to hold at 3.7 percent.
A separate report from the Institute for Supply Management also showed a notable acceleration in the pace of growth in U.S. service sector activity in the month of August.
The ISM said its non-manufacturing index climbed to 56.4 in August after falling to 53.7 in July, with a reading above 50 indicating growth in service sector activity. Economists had expected the index to inch up to 54.0.
The bigger than expected increase by the non-manufacturing index came after it dropped to its lowest level since August of 2016 in the previous month.
While the monthly jobs report is likely to be in the spotlight on Friday, traders are also likely to keep an eye on remarks by Federal Reserve Chairman Jerome Powell.
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