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Treasuries Edge Higher After Seeing Initial Weakness

After showing an initial move to the downside, treasuries turned higher over the course of morning trading on Monday.

Bond prices managed to remain modestly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1 basis point to 1.764 percent.

The uptick by treasuries came despite strength on Wall Street, with the Nasdaq and the S&P 500 reaching new record intraday highs.

Treasuries may have benefited from lingering uncertainty about a U.S.-China trade agreement even though a tabloid run by China's ruling Communist Party discounted "negative" media reports and said the economic superpowers are "very close" to a phase one deal.

China also remains committed to continuing talks for a phase two or even a phase three deal with the United States, the state-backed Global Times said on Twitter.

President Donald Trump and Chinese President Xi Jinping have also recently made positive comments about a potential trade deal despite reports of complications arising that could delay the agreement until next year.

Treasuries continued to see modest strength after the Treasury Department revealed this month's auction of $40 billion worth of two-year notes attracted slightly above average demand.

The two-year note auction drew a high yield of 1.601 percent and a bid-to-cover ratio of 2.63, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.59.

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 auctions of $41 billion worth of five-year notes on Tuesday.

Trading on Tuesday may also be impacted by reaction to reports on home prices, new home sales, and consumer confidence.

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