Treasuries Move To The Downside After Seeing Initial Strength

After an initial move to the upside, treasuries came under pressure over the course of the trading session on Wednesday, extending a recent downward trend.

Bond prices pull back well off their early highs and firmly into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.2 basis points to 3.581 percent after hitting a low of 3.515 percent.

The ten-year yield closed higher for the fourth consecutive session, ending the day at its highest closing level in almost a month.

The downturn by treasuries partly reflected optimism lawmakers will eventually reach an agreement on raising the U.S. debt ceiling following Tuesday’s meeting between President Joe Biden and top congressional leaders.

A statement from the White House described the meeting as “productive” and said Biden is “optimistic that there is a path to a responsible, bipartisan budget agreement.”

Biden directed staff to continue to meet daily on outstanding issues, with the president cutting short an upcoming overseas trip to ensure Congress takes action by the June 1st deadline to avert default.

House Speaker Kevin McCarthy, R-Calif., told reporters following the meeting that the two sides remain “far apart” but said it is “possible to get a deal by the end of the week.”

In U.S. economic news, the Commerce Department released a report unexpectedly showing a significant rebound in new residential construction in the month of April.

The report said housing starts jumped by 2.2 percent to an annual rate of 1.401 million in April after plunging by 4.5 percent to a revised rate of 1.371 million in March.

Economists had expected housing starts to drop to an annual rate of 1.405 million from the 1.420 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits slumped by 1.5 percent to an annual rate of 1.416 million in April after tumbling by 3.0 percent to a revised rate of 1.437 million in March.

Building permits, an indicator of future housing demand, were expected to climb to a rate of 1.430 million from the 1.413 million originally reported for the previous month.

Trading on Thursday may be impacted by reaction to the latest batch of U.S. economic data, including reports on weekly jobless claims, existing home sales and Philadelphia-area manufacturing activity.

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