With traders reacting to news of a successful Spanish bond auction, treasuries saw some weakness during trading on Tuesday. Nonetheless, some disappointing U.S. economic data helped to limit the downside.
Bond prices moved moderately lower in early trading and remained stuck in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.5 basis points to 2.009 percent.
The modest increase by the ten-year yield came after it ended the previous session at its lowest closing level in over a month.
The pullback by treasuries came after Spain sold 3.2 billion euros worth of twelve and eighteen-month bills, above the target of 3 billion euros. While the yields were well above those sold last month, the auctions attracted improved demand.
The results of the bond auctions contributed to a drop in Spanish bond yields and offset some of the recently renewed concerns about the European debt crisis.
As mentioned above, however, selling pressure was subdued following the release of some disappointing U.S. economic data, including a report showing an unexpected drop in housing starts in March.
The report showed that housing starts fell 5.8 percent to an annual rate of 654,000 in March from the revised February estimate of 694,000. Economists had expected starts to rise to an annual rate of 700,000.
At the same time, the Commerce Department said building permits rose 4.5 percent to an annual rate of 747,000 in March from the revised February rate of 715,000. With the increase, building permits rose to their highest level since September of 2008.
A separate report from the Federal Reserve showed that industrial production unexpectedly came in unchanged for the second consecutive month in March.
Looking ahead to Wednesday, trading activity may be somewhat subdued amid a lack of major U.S. economic data. Traders are likely to keep a close eye on any developments overseas.
by RTT Staff Writer
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