Treasuries ended Tuesday's trading modestly higher, extending a recent upward move amid lingering concerns about the looming fiscal cliff.
After seeing early strength, bond prices gave back ground over the course of the morning before moving back to the upside in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.2 basis points to 1.589 percent.
The modest drop on the day extended a recent downward trend by the ten-year yield, which ended the session at a new two-month closing low.
Treasuries benefited from continued concerns about whether lawmakers in Washington will be able to reach an agreement that will avoid the significant tax increases and government spending cuts currently set to take effect at the end of the year.
Leaders from both political parties have called for compromise on the issue, although a familiar battle over higher taxes on wealthier Americans could lead to continued gridlock on Capitol Hill.
Traders also kept an eye on developments in Europe, where finance ministers agreed to give Greece two extra years to meet its budget targets.
After a meeting in Brussels on Monday, Eurogroup chair Jean-Claude Juncker also revealed that the ministers will hold another meeting next week to decide on providing the next tranche of Greek aid.
Economic data may attract attention on Wednesday, with traders likely to keep a close eye on reports on retail sales, producer price inflation, and business inventories. The Federal Reserve is also due to release the minutes of its most recent monetary policy meeting.
by RTT Staff Writer
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