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Treasuries Close Modestly Higher After Seeing Initial Weakness

After an initial move to the downside, treasuries moved modestly higher over the course of the trading session on Tuesday.

Bond prices climbed off their early lows in morning trading and managed to remain in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.7 basis points to 3.208 percent.

With the modest decrease on the day, the ten-year yield gave back ground after ending last Friday's trading at its highest closing level in over seven years.

The rebound by treasuries may partly have reflected bargain hunting following the notable weakness seen over the three previous sessions.

Treasuries may also have benefited from news the International Monetary Fund lowered its forecast for U.S. and Chinese economic growth.

Citing the "negative effect of recent tariff actions," the IMF said economic growth in the U.S. and China is now expected to slow to 2.5 percent and 6.2 percent, respectively, next year.

Overall trading activity was somewhat subdued, however, as a lack of major U.S. economic data kept some traders on the sidelines following the holiday on Monday.

Trading on Wednesday may be impacted by reaction to the Labor Department's report on producer prices in the month of September.

Producer prices are expected to rise by 0.2 percent in September after slipping by 0.1 percent in August. Core producer prices, which exclude food and energy prices, are also expected to tick up by 0.2 percent.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of three-year and ten-year notes.

The Treasury is due to sell $36 billion worth of three-year notes and of $23 billion worth of ten-year notes.

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