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Treasuries Show Notable Downturn After Seeing Early Strength

After moving to the upside early in the session, treasuries showed a significant downturn over the course of the trading day on Tuesday.

Bond prices pulled back well off their highs and into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2 basis points to 2.160 percent after hitting a low of 2.078 percent.

The ten-year yield added to 13.6 basis point spike seen in the previous session, reaching its highest closing level since late May of 2019.

Treasuries initially benefited from bargain hunting following the steep drop seen in the previous session, with a Labor Department report showing producer prices increased by slightly less than expected in February also generating buying interest.

The Labor Department said its producer price index for final demand climbed by 0.8 percent in February after surging by an upwardly revised 1.2 percent in January.

Economists had expected producer prices to advance by 0.9 percent compared to the 1.0 percent jump originally reported for the previous month.

Excluding prices for food, energy and trade services, core producer prices edged up by 0.2 percent in February following a 0.8 percent increase in January.

Buying interest waned over the course of the morning, however, as traders continued to anticipate the Federal Reserve announcing its first interest rate hike since 2018 on Wednesday.

The Fed is widely expected to raise interest rates by 25 basis points, with traders likely to pay close attention the accompanying statement for clues about the outlook for rates.

The central bank is likely to continue raising rates over the comings months in an effort to combat elevated inflation, although the economic impact of the Russia-Ukraine conflict may affect the pace.

While the Fed announcement will be in the spotlight on Wednesday, traders are also likely to keep an eye on reports on retail sales, import and exports prices, and homebuilder confidence.

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