Bond Prices Claw Back to Little-Changed – 10-Year 2.33%

U.S. Treasury prices headed out little-changed but lower in muted trade with the market losing an early bid as September services sector data jumped to a much higher-than-expected 12-year high while other reports were nearly in line to a bit better. The market continued to hear chatter and react to potential replacements for Federal Reserve Chair Janet Yellen, with prices rising on the more dovish choices and falling on the hawks.

The 30-year yield closed near 2.877% from a 2.8456% low, 2.8933% high and 2.872% close Tuesday. The 10-year yield went out near 2.33% from an early 2.3017% low, 2.3455% high and 2.332% close. The five-year yield settled near flat at 1.923% from a 1.893% low and 1.9444% high. The two-year yield settled near 1.479% from a 1.4511% low, 1.4952% high and 1.475% close.

The curve trade went out on a mixed note, unwinding early steepeners, with the two- and 10-year yield spread flattened to 85.1 from 85.7 while the five- and 30-year yield gap widened to a steeper 95.3 from 95.

CME Group fed fund futures traders knocked around the odds of a minimum 25 basis point rate-hike by year-end, heading out near 77.9% versus an earlier 83% probability against 43.7% a month back.

Thursday’s calendar has the initial weekly jobless claims and August trade deficit at 8:30 a.m. ET with August factory orders due at 10 a.m.

Treasury will offer details on next week’s auctions at 11 a.m., with some of the sales pushed forward a day due to the Monday Oct. 9 close for Columbus Day. The details include those for the new three-year notes and reopened 10-year auctions Tuesday with the reopened 30-years sale Thursday. Tuesday will see the auctions of the four- and 52-week bills along with the three- and six-months.

Fed speak has Powell on Treasury market practices at 9:10 a.m. with a following Q&A. San Francisco’s John Williams will speak at the St. Louis community banking event at 9:15 a.m. Philadelphia’s Patrick Harker speaks in investing at 9:30 a.m.followed by Kansas City’s Esther George at 4:30 p.m.

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