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Treasuries Close Nearly Flat For Third Straight Session

After an early move to the downside, treasuries recovered over the course of the trading day on Tuesday before closing nearly flat for the third straight session.

Bond prices saw modest weakness in morning trading before rebounding in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.709 percent.

The initial weakness among treasuries came as stock futures rebounded from an overnight nosedive after White House trade adviser Peter Navarro clarified his remarks about the U.S.-China trade deal.

"It's over," Navarro said in response to a question about the trade deal in an interview on Fox News on Monday, adding that the "turning point" was China's failure to warn the United States about the coronavirus outbreak.

However, Navarro subsequently released a statement attempting to clarify his remarks, claiming his initial comments were "taken wildly out of context."

"They had nothing at all to do with the Phase I trade deal, which continues in place," Navarro said. "I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world."

Trump also sought to reassure investors with a post on Twitter declaring the trade deal is "fully intact" and saying he hopes China will "continue to live up to the terms of the Agreement!"

The subsequent rebound by treasuries may have reflected lingering concerns about the ongoing coronavirus pandemic, with the number of coronavirus cases and hospitalizations rising in several states across the country.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $46 billion worth of two-year notes, which attracted below average demand.

The two-year note auction drew a high yield of 0.193 percent and a bid-to-cover ratio of 2.46, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.61.

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

In U.S. economic news, the Commerce Department released a report showing a substantial increase in new home sales in the month of May.

The report said new home sales spiked by 16.6 percent to an annual rate of 676,000 in May from a significantly downwardly revised rate of 580,000 in April.

Economists had expected new home sales to jump 2.7 percent to an annual rate of 640,000 from the 623,000 originally reported for the previous month.

A lack of major U.S. economic data may lead to another lackluster performance on Wednesday, although traders are likely to keep an eye on the latest news on the coronavirus front.

The Treasury is also due to announce the results of its auction of $47 billion worth of five-year notes Wednesday afternoon.

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