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Treasuries Show Significant Rebound Amid Geopolitical Concerns

Following the modest pullback seen in the previous sessions, treasuries showed a significant move back to the upside during trading on Tuesday.

Bond prices moved steadily higher in morning trading before moving roughly sideways in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price slid 7.3 basis points to 2.179 percent.

With the notable decrease on the day, the ten-year yield fell to its lowest closing level in five months.

The rebound by treasuries came amid geopolitical concerns after North Korean Vice-Foreign Minister Han Song-ryol told the BBC the communist nation plans to conduct weekly missile tests.

Han also warned that the U.S. would face "all out war" if it responded to the continued missile tests with military action.

Vice President Mike Pence has said "all options are on the table" to address North Korea's missile and nuclear testing programs, declaring that "the era of strategic patience is over."

Uncertainty about the outcome of the French presidential election also generated buying interest ahead of the first round of voting on Sunday.

News that U.K. Prime Minister Theresa May has called for early elections has added to the political uncertainty in Europe.

On the U.S. economic front, the Commerce Department released a report showing a sharp pullback in new residential construction in the month of March.

The report said housing starts plunged by 6.8 percent to an annual rate of 1.215 million in March from an upwardly revised 1.303 million in February. Economists had expected housing starts to drop by 2 percent.

Meanwhile, the Commerce Department said building permits, an indicator of future housing demand, jumped by 3.6 percent to a rate of 1.260 million in March from a revised 1.216 million in February. Building permits had been expected to climb by 3.1 percent.

A separate report from the Federal Reserve showed that industrial production increased in line with economist estimates in March, reflecting a substantial rebound in utilities output.

The report said industrial production climbed by 0.5 percent in March after inching up by 0.1 percent in February. The increase in production matched the consensus estimate.

Late in the trading day on Wednesday, the Fed is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

The Beige Book may shed some additional light on the outlook for interest rates ahead of the Fed's monetary policy meeting early next month.

by RTTNews Staff Writer

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