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Treasuries Pull Back Sharply After Recent Upward Trend

After moving sharply higher over the past several sessions, treasuries showed a notable move back to the downside during trading on Wednesday.

Bond prices moved steadily lower throughout the day before closing firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, surged up by 9.7 basis points to 1.732 percent.

With the sharp increase on the day, the ten-year yield closed higher for the first time in eight sessions.

The pullback by treasuries came as traders reacted to the release of the transcript of President Donald Trump's controversial call with Ukrainian President Volodymyr Zelensky.

The transcript confirms Trump discussed a possible investigation of former Vice President and Democratic frontrunner Joe Biden in the call with Zelensky, although he does not directly link the issue to U.S. aid.

The release of the transcript comes amid claims Trump threatened to withhold military aid from Ukraine unless Zelensky conducted an investigation of Biden and his son Hunter.

A day before the release of the transcript, House Speaker Nancy Pelosi, D-Calif., announced the Democrat-controlled House is moving forward with an official impeachment inquiry of Trump.

Pelosi said she is directing six House committees to proceed with their investigations under the umbrella of the impeachment inquiry, saying Trump "must be held accountable" and "no one is above the law."

The speaker accused Trump of a breach of his constitutional responsibilities by calling upon a foreign power to intervene in the upcoming election.

Pelosi also accused the Trump administration of violating the law by refusing to turn over the whistleblower complaint that sparked the uproar over the call.

The White House is reportedly considering releasing the complaint to Congress, although conservative media outlets have already begun seeking to damage the credibility of the whistleblower.

On the U.S. economic front, the Commerce Department released a report showing U.S. new home sales rebounded strongly in the month of August following a sharp pullback in the previous month.

The Commerce Department said new home sales surged up by 7.1 percent to an annual rate of 713,000 in August after plunging by 8.6 percent to a revised rate of 666,000 in July.

Economists had expected new home sales to jump by 3.9 percent to a rate of 660,000 from the 635,000 originally reported for the previous month.

Treasuries saw continued weakness after the Treasury Department revealed this month's auction of $41 billion worth of five-year notes attracted slightly below average demand.

The five-year note auction drew a high yield of 1.600 percent and a bid-to-cover ratio of 2.32, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.36.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Looking ahead, the Treasury is due to announce the results of its auction of $32 billion worth of seven-year notes on Thursday.

A batch of U.S. economic data could also impact trading on Thursday, with traders likely to keep an eye on reports on second quarter GDP, weekly jobless claims, and pending home sales.

For comments and feedback contact: editorial@rttnews.com

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