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Treasuries Pull Back Off Best Levels But Remain Firmly Positive

After taking a brief pause in the previous session, treasuries resumed their recent strong move to the upside during trading on Wednesday.

Bond prices gave back ground after an early jump but remained firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.5 basis points to 1.684 percent.

While the ten-year yield climbed off its intraday low of 1.595 percent, it still ended the session at its lowest closing level in almost three years.

The initial spike by treasuries came as traders reacted to aggressive interest rate cuts by central banks in India, New Zealand and Thailand amid concerns about the global impact of the U.S.-China trade war.

Citing the overseas rate cuts, President Donald Trump claimed in a series of posts on Twitter that the problem is "not China" but rather a Federal Reserve that is "too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)"

"They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW," Trump tweeted. "Yield curve is at too wide a margin, and no inflation!"

"Incompetence is a terrible thing to watch, especially when things could be taken care of sooo easily," he added. "We will WIN anyway, but it would be much easier if the Fed understood, which they don't, that we are competing against other countries, all of whom want to do well at our expense!"

The escalating U.S.-China trade war also has investors paying close attention to daily developments on the currency front.

The People's Bank of China set the midpoint for onshore yuan trading at 6.9996 per dollar, slightly stronger than the key 7.00 per dollar level but 0.4 percent weaker than 6.9683 on Tuesday.

Treasuries gave back some ground in afternoon trading after the Treasury Department revealed its auction of $27 billion worth of ten-year notes attracted below average demand.

The ten-year yield note auction drew a high yield of 1.670 percent and a bid-to-cover ratio of 2.20, 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.

Developments on the trade front are likely to remain in focus on Thursday, potentially overshadowing reports on weekly jobless claims and wholesale inventories.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $19 billion worth of thirty-year bonds.

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