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Treasuries Close Roughly Flat After Recovering From Initial Weakness

After coming under pressure early in the session, treasuries staged a significant recovery attempt over the course of the trading day on Wednesday.

Bond prices climbed well off their early lows before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.550 percent.

In early trading, the ten-year yield rose as high as 2.595 percent, representing the highest intraday level in almost ten months.

The early weakness came after a report from Bloomberg News indicated Chinese officials have recommended slowing or halting purchases of U.S. treasuries.

People familiar with the matter told Bloomberg the officials believe the market for U.S. government bonds is becoming less attractive relative to other assets.

The officials also think trade tensions between the U.S. and China may provide a reason to slow or stop buying American debt, the people said.

Treasuries rebounded due in part to the Treasury Department's auction of $20 billion worth of ten-year notes attracting above average demand.

The ten-year note auction drew a high yield of 2.579 percent and a bid-to-cover ratio of 2.69, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.44.

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

On the U.S. economic front, the Labor Department released a report showing import prices rose by much less than expected in the month of December.

The Labor Department said import prices inched up by 0.1 percent in December after climbing by an upwardly revised 0.8 percent in November.

Economists had expected import prices to rise by 0.5 percent compared to the 0.7 percent increase originally reported for the previous month.

The report also showed an unexpected decrease in export prices, which edged down by 0.1 percent in December after rising by 0.5 percent in November. Export prices had expected to rise by 0.3 percent.

A separate report from the Commerce Department showed wholesale inventories increased by slightly more than anticipated in the month of November.

Trading on Thursday may be impacted by reaction to economic reports on weekly jobless claims and producer price inflation.

The Treasury is also due to finish off this week's series of long-term securities auctions with the sale of $12 billion worth of thirty-year bonds.

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