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Treasuries See Further Downside After Yellen Testimony

After turning lower over the course of the previous sessions, treasuries saw some further downside during trading on Wednesday.

Bond prices came under pressure early in the session and remained stuck in the red throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.8 basis points to 2.376 percent.

The weakness among treasuries came as Federal Reserve Chair Janet Yellen's testimony before the Congressional Joint Economic Committee further solidified expectations the Fed will raise interest rates next month.

In prepared remarks, Yellen said economic growth appears to have stepped up from its subdued pace early in the year.

"The economic expansion is increasingly broad-based across sectors as well as across much of the global economy," Yellen said.

She added, "I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen further, supporting faster growth in wages and incomes."

Yellen noted inflation has continued to run below the Fed's 2 percent target but said recent lower readings on inflation likely reflect transitory factors.

"With the minutes from the Fed's November meeting revealing that most officials still share Yellen's view that the recent weakness of inflation will prove transitory, a December rate hike still looks the most likely outcome," said Andrew Hunter, U.S. economist at Capital Economics.

Upbeat economic data may also have reduced the appeal of treasuries, with a report from the Commerce Department showing stronger than previously estimated economic growth in the third quarter.

The report said real gross domestic product surged up by an upwardly revised 3.3 percent in the third quarter compared to the originally reported 3.0 percent jump. Economists had expected the increase in GDP to be upwardly revised to 3.2 percent.

With the bigger than expected upward revision, the GDP growth in the third quarter is now stronger than the 3.1 percent increase seen in the second quarter.

A separate report from the National Association of Realtors showed a much bigger than expected increase in pending home sales in the month of October.

NAR said its pending home sales index surged up by 3.5 percent to 109.3 in October after dipping by 0.4 percent to a downwardly revised 105.6 in September. Economists had expected pending home sales to climb by 1.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Economic data may continue to attract attention on Thursday, with traders likely to keep an eye on reports on weekly jobless claims, personal income and spending, and Chicago-area business activity.

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