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Treasuries Pull Back Off Best Levels But Close Modestly Higher

After moving higher over the course of the two previous sessions, treasuries saw some further upside during trading on Monday.

Bond prices moved notably higher early in the session but gave back some ground as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 2.859 percent.

With the modest decrease on the day, the ten-year yield pulled back further off the four-year closing high set last Wednesday.

The early strength among treasuries was partly in reaction to dovish comments by St. Louis Federal Reserve President James Bullard.

Bullard, who is not a voting member of the Fed's policy committee this year, warned against aggressive interest rate hikes that are not supported by incoming data.

"If the Committee raises the policy rate substantially from here without other changes in the data, the policy setting could become restrictive," Bullard said at a National Association of Business Economics conference.

However, traders seemed somewhat reluctant to make more significant moves ahead of congressional testimony by new Federal Reserve Chairman Jerome Powell.

Powell is scheduled to testify before the House Financial Services Committee on the Fed's Semiannual Monetary Policy Report on Tuesday.

On the U.S. economic front, the Commerce Department released a report unexpectedly showing a steep drop in new home sales in January.

The report said new home sales plunged by 7.8 percent to an annual rate of 593,000 in January after slumping by 7.6 percent to an upwardly revised 643,000 in December.

The continued decrease surprised economists, who had expected new home sales to jump by 3.2 percent to a rate of 645,000 from the 625,000 originally reported for the previous month.

Powell's testimony is likely to be in focus on Tuesday, although reports on durable goods orders and consumer confidence may also attract attention.

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