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Treasuries Close Slightly Lower After Seeing Early Strength

After moving to the upside early in the session, treasuries moved modestly lower over the course of the trading day on Wednesday.

Bond prices pulled back well off their early highs but managed to climb off their worst levels going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 1.541 percent.

With the slight uptick on the day, the ten-year yield closed higher for the seventh consecutive session, reaching its highest closing level in over three months.

Treasuries initially benefited from bargain hunting following the sell-off seen over the past several sessions, although buying interest waned over the course of the morning.

The subsequent downturn by treasuries came after Federal Reserve Chair Jerome Powell warned inflation could be held up longer than previously thought due to supply chain problems.

"The current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy, which is a process that will have a beginning, a middle and an end," Powell said during a virtual forum with other central bank leaders

"We see those things resolving," he added but noted, "It's very difficult to say how big those effects will be in the meantime or how long they will last."

Treasuries have been trending lower since the Fed signaled last week that it is likely to begin scaling back its asset purchases in the near future.

On the U.S. economic front, the National Association of Realtors released a report showing pending home sales skyrocketed by much more than expected in the month of August.

NAR said its pending home sales soared by 8.1 percent to 119.5 in August after tumbling by 2.0 percent to a revised 110.5 in July.

Economists had expected pending home sales to jump by 1.4 percent compared to the 1.8 percent slump originally reported for the previous month.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The pending home sales index reached its highest level since January but was still down by 8.3 percent compared to the same month a year ago.

A report on weekly jobless claims may attract attention on Thursday along with another day of Congressional testimony by Powell.

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