U.S. Treasurys traded near flat on Thursday as a stunningly strong report on Midwest business activity eased some pessimism that fourth-quarter growth may be sub-par following the recent federal government shutdown.
Despite Thursday's decline, the bond market was poised for a second month of gains after a dismal summer. The Institute for Supply Management-Chicago said its regional business index jumped to 65.9 in October from 55.7 last month. The reading handily beat the 55.0 forecast by analysts and was the highest since March 2011.
"This was just ridiculously strong,'' said Eric Green, global head of rates and currency research and strategy at TD Securities in New York. Still, Green and other analysts downplayed the importance of the data as many other indicators have signaled slower demand and hiring in the aftermath of the first partial federal government shutdown in 17 years. They stuck to the view that the Federal Reserve will keep its current $85-billion monthly bond purchases into early 2014 to support the economy.