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Treasuries Close Higher But Well Off Best Levels

Mirroring the performance seen in the previous session, treasuries gave back ground after an early advance on Tuesday but still closed in positive territory.

Bond prices pulled back well off their early highs but managed to hold on to modest gains. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slipped by 1.5 basis points to 1.592 percent after hitting a low of 1.557 percent.

Treasuries initially benefited from weakness on Wall Street, with technology stocks showed a significant move to the downside on the day.

The tech-heavy Nasdaq reached a record intraday high during trading last Thursday but has pulled back sharply since then, falling to its lowest intraday level in a month.

Traders may be cashing in on tech stocks that benefited from the coronavirus-induced lockdowns as more states continue to lift restrictions.

However, treasuries gave back ground following comments from Treasury Secretary Janet Yellen, who suggested interest rates may have to rise modestly to prevent the economy from overheating amid the recent spike in government spending.

"Even though the additional spending is relatively small relative to the size of the economy, it could cause some very modest increases in interest rates," Yellen said at The Atlantic's Future Economy Summit.

"But these are investments our economy needs to be competitive and to be productive," she added. "I think our economy will grow faster because of them."

The comments from Yellen come even though the Federal Reserve has repeatedly indicated interest rates are likely to remain at near-zero levels for the foreseeable future.

In U.S. economic news, a report released by the Commerce Department showed the U.S. trade deficit hit a new record high in the month of March.

The Commerce Department said the trade deficit widened to $74.4 billion in March from a revised $70.5 billion in February.

The trade deficit was nearly in line with estimates, as economists had expected the deficit to widen to $74.5 billion from the $71.1 billion originally reported for the previous month.

A separate report from the Commerce Department showed new orders for U.S. manufactured goods rebounded slightly less than expected in the month of March.

The Commerce Department said factory orders jumped by 1.1 percent in March after falling by a revised 0.5 percent in February.

Economists had expected factory orders to surge up by 1.3 percent compared to the 0.8 percent drop originally reported for the previous month.

Trading on Wednesday may be impacted by reaction to reports on private sector employment and service sector activity.

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