Treasuries Move Back To The Downside Amid Optimism About Stimulus

(RTTNews) - After recovering from an initial drop over the course of the previous session, treasuries moved back to the downside during trading on Tuesday.

Bond prices drifted lower as the day progressed before closing firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 0.923 percent.

The weakness among treasuries came as unrelenting optimism lawmakers will eventually agree on a new fiscal stimulus bill reduced the appeal of safe havens such as bonds.

Treasuries fell to their lows of the session following news that House Speaker Nancy Pelosi is due to meet with other congressional leaders to discuss a relief package.

Pelosi is due to meet with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer and House Minority Leader Kevin McCarthy, while Treasury Secretary Steven Mnuchin will participate by phone.

In a post on Twitter on Monday, Pelosi's Deputy Chief of Staff Drew Hammill noted the Speaker and the Treasury Secretary spoke by phone and "discussed the urgency of the committees finishing their work as soon as possible."

Hammill said Pelosi reiterated Democrats' concerns about liability provisions, which remain an obstacle to securing state and local funding.

The conversation between Pelosi and Mnuchin came as bipartisan group of lawmakers publicly released their latest proposal, which was largely in line with a report from Reuters on Monday.

The proposal calls for a previously unveiled $908 billion bipartisan relief plan to be split into two proposals that could be voted on separately in order to win approval.

One bill would be a $748 billion measure including money for small businesses, the jobless and COVID-19 vaccine distribution, while the other would include more controversial measures such as liability protections for business and aid for state and local governments.

Further reducing the appeal of treasuries, the Federal Reserve released a report showing U.S. industrial production rose by slightly more than expected in the month of November.

The report said industrial production climbed by 0.4 percent in November following a downwardly revised 0.9 percent advance in October.

Economists had expected industrial production to rise by 0.3 percent compared to the 1.1 percent jump originally reported for the previous month.

The Fed's monetary policy announcement is likely to be in focus on Wednesday, as the central bank is widely expected to leave interest rates unchanged but many traders are optimistic the Fed will provide additional stimulus.

Reports on retail sales, homebuilder confidence and business inventories may also attract attention along with any developments on Capitol Hill.