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Treasuries Move Back To The Upside After Yesterday's Pullback

Following the pullback seen in the previous session, treasuries moved back to the upside over the course of the trading day on Wednesday.

Bond prices moved modestly higher early in the session and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4 basis points to 2.868 percent.

Concerns about the outlook for interest weighed on treasuries on Tuesday, as new Federal Reserve Chairman Jerome Powell seemed to suggest that the Fed may raise rates more than the three times currently anticipated.

During testimony before the House Financial Services Committee, Powell noted that incoming data has indicated a strengthening in the economy since the median forecast called for three rate hikes at the December meeting.

Powell stressed that he did not want to prejudge the new set of projections, but his comments still raised concerns about four rate increases this year.

A disappointing batch of economic data may have partly offset the interest rate concerns, with a report from the Commerce Department showing slightly slower than previously estimated economic growth in the fourth quarter.

The Commerce Department said gross domestic product climbed by 2.5 percent in the fourth quarter compared to the previously estimated 2.6 percent increase. The downward revision to GDP growth matched economist estimates.

A separate report from the National Association of Realtors unexpectedly showed a steep drop in pending home sales in the month of January.

NAR said its pending home sales index tumbled by 4.7 percent to 104.6 in January from a downwardly revised 109.8 in December. Economists had expected pending home sales to rise by 0.3 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.

With the unexpected decrease, the pending home sales index slumped to its lowest level since hitting 104.1 in October of 2014.

MNI Indicators also released a report showing a bigger than expected slowdown in the pace of growth in Chicago-area business activity in the month of January.

Powell's second day of testimony on Capitol Hill is likely to attract attention on Thursday, with the Fed chief due to appear before the Senate Banking Committee.

With Powell's prepared remarks likely to mirror those he delivered before the House Financial Services Committee, traders are likely to focus on the question-and-answer segment for clues about the outlook for interest rates.

Traders are also likely to keep an eye on a slew of U.S. economic data, including reports on weekly jobless claims, personal income and spending, manufacturing activity, and construction spending.

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