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Treasuries Give Back Ground Amid Optimism About Stimulus Bill

After moving sharply higher over the past few sessions, treasuries gave back some ground during trading on Tuesday.

Bond prices climbed off their worst levels in afternoon trading but remained firmly negative. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 5.2 basis points to 0.816 percent.

The pullback by treasuries came amid indications Democrats and Republicans are closing in on an agreement on a massive fiscal stimulus bill.

After a meeting with Treasury Secretary Steve Mnuchin and incoming White House Chief of Staff Mark Meadows, Senate Minority Leader Chuck Schumer, D-N.Y., said negotiations were on the "two-yard line."

"Last night, I thought we were on the five-yard line. Right now, we're on the two," Schumer said on the Senate floor. "Of the few outstanding issues, I don't see any that can't be overcome in the next few hours."

Schumer indicated Democrats are still pushing for increased oversight of a proposed $500 billion bailout fund to help industries that are struggling amid the coronavirus outbreak.

The ongoing negotiations come after the stimulus bill failed to clear a key procedural hurdle in the Senate for two straight days amid opposition from Democrats.

Most Democratic Senators voted against advancing the bill amid complaints that the legislation does too much to bail out companies and not enough to provide assistance to workers.

Traders were also reacting to President Donald Trump's comments suggesting the coronavirus-related shutdown of much of the country could end sooner than many anticipated.

Trump said during a Fox News virtual town hall that he would love to see the country "open" by Easter, which is on April 12th.

"We're opening up this incredible country. Because we have to do that. I would love to have it open by Easter," Trump said.

Trump's remarks represent a sharp contrast to his comments just last week indicating the coronavirus pandemic would not be under control until July or August.

The president's eagerness to get the economy back up and running may also lead to conflict with public health officials, who are likely to continue to call for social distancing.

Meanwhile, the Treasury Department revealed that its auction of $40 billion worth of two-year notes attracted below average demand.

The two-year note auction drew a high yield of 0.398 percent and a bid-to-cover ratio of 2.36, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.58.

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

Traders largely shrugged off a report from the Commerce Department showing new home sales pulled back off a nearly thirteen-year high in February, with the data widely seen as old news.

A report on durable goods orders in February is scheduled to be released on Wednesday but also likely won't attract much attention, as traders focus on developments in Washington.

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