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Treasuries Close Roughly Flat After Seeing Initial Weakness

After an initial move to the downside, treasuries rebounded over the course of the trading session on Tuesday before ending the day roughly flat.

Bond prices spent much of the afternoon lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.140 percent after reaching a high of 2.174 percent.

The initial weakness among treasuries came as some traders moved out of the bond markets amid signs of continued upward momentum on Wall Street.

Selling pressure waned over the course of the morning, however, as stocks pulled back after initially extending a recent upward trend.

Treasuries showed a lack of direction thereafter, as traders awaited further developments regarding the ongoing trade dispute between the U.S. and China.

The U.S.-China trade conflict largely took a back seat to President Donald Trump's threatened tariffs on Mexico but may move back into the spotlight ahead of the G20 summit later this month.

Trump and Chinese President Xi Jinping are expected to meet at the summit, with the U.S. president warning that he will impose new tariffs on Chinese goods if his counterpart does not attend.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $38 billion worth of three-year notes, which attracted above average demand.

The three-year note auction drew a high yield of 1.861 percent and a bid-to-cover ratio of 2.62, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.55.

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 said its producer price index for final demand inched up by 0.2 percent in May after rising by 0.2 percent in April. The uptick in prices matched economist estimates.

Excluding food and energy prices, core producer prices rose by 0.2 percent in May after edging up by 0.1 percent in the previous month. The increase in core prices also met expectations.

The report also said the annual rate of growth in producer prices slowed to 1.8 percent from 2.2 percent in April, coming in below estimates for an increase of 2.0 percent.

The annual rate of core producer price growth also dipped to 2.3 percent in May from 2.4 percent in April, matching expectations.

On Wednesday, the Labor Department is scheduled to release its more closely watched report on consumer price inflation in May.

Trading could also be impacted by reaction to the results of the Treasury Department's auction of $24 billion worth of ten-year notes.

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