2020.07.0619:19:00UTC+00Treasuries Close Modestly Lower Amid Economic Optimism

After turning higher over the course of the previous session, treasuries moved back to the downside during trading on Monday.

Bond prices regained some ground going into the close but still ended the day in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.5 basis points to 0.684 percent.

The weakness among treasuries came as traders remain generally optimistic about the U.S. economic outlook following last Thursday's better than expected jobs data, reducing the appeal of safe havens like bonds.

In the latest sign of the rapid economic recovery, the Institute for Supply Management released a report showing a substantial turnaround in U.S. service sector activity in the month of June.

The ISM said its non-manufacturing index spiked to 57.1 in June from 45.4 in May, with a reading above 50 indicting an increase in service sector activity. Economists had expected the index to climb to 50.1.

The sharp increase by the non-manufacturing index reflected the largest single-month percentage-point increase since its debut in 1997.

"The non-manufacturing composite index indicated growth after two consecutive months of contraction," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

He added, "Respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen."

The economic optimism overshadowed the recent spike in coronavirus cases even as the World Health Organization reported the biggest single-day increase in cases on Saturday.

A lack of major U.S. economic data may lead to light trading activity on Tuesday, although bond traders are likely to keep an eye on the results of the Treasury Department's auction of $46 billion worth of three-year notes.