Following the sharp pullback seen in the previous session, treasuries saw some further downside during trading on Tuesday.
After coming under pressure in early trading, treasuries regained some ground before pulling back in afternoon trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.4 basis points to 2.262 percent.
The ten-year yield added to the 8.7 basis point gain posted on Monday but remained below last Wednesday’s five-month closing high.
The continued weakness among treasuries was partly due to the release of a Commerce Department report showing a substantial increase in U.S. housing starts in the month of April.
The report said housing starts surged up 20.2 percent to an annual rate of 1.135 million in April from the revised March estimate of 944,000. Economists had expected housing starts to climb to a rate of 1.029 million.
With the bigger than expected increase, housing starts reached their highest level since hitting 1.197 million in November of 2007.
Building permits, an indicator of future housing demand, also jumped by 10.1 percent to an annual rate of 1.143 million in April.
Jennifer Lee, senior economist at BMO Capital, said, “U.S. second quarter growth may have been revised down recently but at least there will be upward support from residential construction.”
The strong housing data came on the heels of some recent disappointing economic reports and led to renewed concerns about the timing of the Federal Reserve’s first interest rate hike.
Trading on Wednesday may be impacted by the release of the minutes of the latest Fed meeting, which could shed some light on the outlook for rates.
The material has been provided by InstaForex Company – www.instaforex.com