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Treasuries Regain Ground Following Recent Weakness

12/19/2012 3:38 PM ET

Treasuries moved moderately higher during trading on Wednesday, regaining some ground after falling rather sharply in recent sessions.

After moving notably higher in early trading, bond prices pulled back off their best levels but remained in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 1.80 percent.

The modest pullback by the ten-year yield came after it ended the previous session at its highest closing level in well over a month.

Bargain hunting may have contributed to the rebound by treasuries, with some traders moving back into the bond markets following the recent weakness.

Continued uncertainty about the looming fiscal cliff also generated some buying interest, with remarks by President Barack Obama and House Speaker John Boehner suggesting that an agreement might not as close as it appeared earlier this week.

On the economic front, the Commerce Department released a report showing that U.S. housing starts came in below economist estimates in November.

The report said housing starts fell 3.0 percent to an annual rate of 861,000 in November from the revised October estimate of 888,000. Economists had expected housing starts to fall to 865,000 from the 894,000 originally reported for the previous month.

At the same time, the Commerce Department said building permits rose 3.6 percent to an annual rate of 899,000 in November from the revised October rate of 868,000.

Building permits, an indicator of future housing demand, had been expected to climb to 875,000 from the 866,000 originally reported for October.

The much stronger than expected monthly increase lifted building permits to their highest annual rate since July of 2008.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $29 billion worth of seven-year notes.

The seven-year note auction drew a high yield of 1.233 percent and a bid-to-cover ratio of 2.72, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.75.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Several key U.S. economic reports are scheduled to be released on Thursday, including reports on weekly jobless claims, existing home sales, and Philadelphia-area manufacturing activity.

Nonetheless, the data is likely to be overshadowed by any developments in Washington regarding the fiscal cliff negotiations.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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