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Treasuries Pull Back Sharply Following Recent Strength

After moving sharply higher over the past few weeks, treasuries showed a significant move back to the downside during trading on Tuesday.

Bond prices gapped open sharply lower and slid even more firmly into negative territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, soared by 24.9 basis points to 0.748 percent.

With the increase, the ten-year yield closed higher for the first time in fourteen sessions, bouncing off Monday's record closing low.

The initial weakness among treasuries came as traders reacted to President Donald Trump's pledge to provide "very substantial relief" amid the economic fallout from the coronavirus outbreak.

Trump told reporters Monday evening that he would be meeting with House and Senate Republicans today to discuss a possible payroll tax cut or other stimulus measures.

The president said he would also talk with GOP lawmakers about getting help for hourly wage earners, hinting at providing paid leave to those affected by the coronavirus.

Trump indicated he plans to hold another press conference later today to discuss the economic steps being taken, although administration officials told CNBC the White House is not ready to roll out specific economic proposals.

Treasuries saw further downside in afternoon trading after the Treasury Department revealed this month's auction of $38 billion worth of three-year notes attracted well below average demand.

The three-year note auction drew a high yield of 0.563 percent and a bid-to-cover ratio of 2.20, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.49.

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

A report on consumer price inflation is due to be released on Wednesday but is likely to be overshadowed by the latest news on the coronavirus and efforts to address the economic impact of the outbreak.

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