Treasuries Close Nearly Flat After Seeing Modest Strength In Early Trading

After moving modestly higher early in the session, treasuries pulled back near the unchanged line over the course of the trading day on Monday.

Bond prices hovered in positive territory in morning trading but edged slightly lower in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by less than a basis point to 0.704 percent after hitting a low of 0.674 percent.

The pullback by treasuries came as stocks on Wall Street moved mostly higher as the day progressed, with the tech-heavy Nasdaq climbing back toward the record intraday high set earlier in the month.

The strength on Wall Street came as traders continued to express optimism the U.S. economy will quickly recover from the coronavirus-induced setback.

Recent retail sales and employment data far exceeded estimates, helping reinforce hopes of a V-shaped recovery even as most economists urge caution.

Early in the session, treasuries benefited from concerns about rising coronavirus cases in the U.S. and other parts of the world.

According to the World Health Organization, more than 183,000 new coronavirus infections were reported globally on Sunday, the biggest single-day increase since the outbreak began.

Brazil has become a major coronavirus hotspot in recent weeks and led the spike in new infections with 54,771 new cases.

The U.S. was next with 36,617 new cases as states in the South, West and Midwest see surges in new infections following recent reopening.

During his speech in Tulsa, Oklahoma, on Saturday, President Donald Trump blamed the jump in new cases on increased testing and suggested he would like to see testing slowed down.

On the U.S. economic front, the National Association of Realtors released a report showing a continued nosedive in existing home sales in May, although the group’s chief economist expressed confidence sales would rebound in the coming months.

NAR said existing home sales plunged by 9.7 percent to an annual rate of 3.91 million in May after plummeting by 17.8 percent to a rate of 4.33 million in April. Economists had expected existing home sales to slump by 4.8 percent to a rate of 4.12 million.

“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Lawrence Yun, NAR’s chief economist.

He added, “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

On Tuesday, the Commerce Department is scheduled to release a separate report on new home sales in the month of May.

Bond traders are also likely to keep an eye on the results of the Treasury Department’s auction of $46 billion worth of two-year notes.

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