Treasuries Close Modestly Lower After Seeing Early Strength

(RTTNews) - After failing to sustain an early upward move, treasuries showed a notable downturn before ending Tuesday's trading modestly lower.

Bond prices pulled back off their early highs over the course of the morning and remained stuck in the red throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.8 basis points to 2.405 percent.

With the modest increase on the day, the ten-year yield added to the gain posted in the previous session, climbing further off last Friday's one-year closing low.

The pullback by treasuries was partly due to the release of a report from the Commerce Department showing a substantial rebound in U.S. housing starts in the month of July.

The Commerce Department said housing starts jumped 15.7 percent to an annual rate of 1.093 million in July after falling 4 percent to a revised 945,000 in June.

Economists had been expecting housing starts to climb to a rate of 963,000 from the 893,000 originally reported for the previous month.

With the substantial increase, housing starts rose to their highest level reaching a rate of 1.105 million in November of last year.

Easing geopolitical concerns also reduced the safe haven appeal of bonds amid news that Russian President Vladimir Putin is due to meet with his Ukrainian counterpart Petro Poroshenko next week.

The Kremlin said Putin will meet with Poroshenko as well as the heads of the Customs Union member-states in Minsk, Belarus, on August 26th.

The meeting between Putin and Poroshenko will mark their first face-to-face talks since June and could be a key step in resolving the ongoing conflict in eastern Ukraine.

Meanwhile, bond traders largely shrugged off tame consumer price inflation data despite indications that the report eases some of the pressure on the Federal Reserve to start considering rate hikes.

The outlook for monetary policy is likely to be in focus on Wednesday, however, as the Fed is due to release the minutes of its July meeting.