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Treasuries Give Back Ground But Close Well Off Early Lows

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After moving higher over the two previous sessions, treasuries gave back some ground during the trading day on Tuesday.

Bond prices climbed well off their worst levels after an early move to the downside but remained in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.3 basis points to 2.824 percent.

The early pullback by treasuries came after the Federal Reserve released a report showing U.S. industrial production increased by more than expected in the month of July.

The Fed said industrial production climbed by 0.6 percent in July following a revised unchanged reading in June.

Economists had expected industrial production to rise by 0.3 percent compared to the 0.2 percent dip originally reported for the previous month.

Meanwhile, traders largely shrugged off a Commerce Department showing new residential construction tumbled by much more than expected in the month of July.

The report showed housing starts plunged by 9.6 percent to an annual rate of 1.446 million in July after slumping by 2.4 percent to a rate of 1.559 million in June. Economists had expected housing starts to decline by 1.2 percent to a rate of 1.540 million.

With the much steeper than expected drop, housing starts dove to their lowest annual rate since hitting 1.430 million in February of 2021.

Building permits, an indicator of future housing demand, also fell by 1.3 percent to an annual rate of 1.674 million after inching up by 0.1 percent to a revised rate of 1.696 million in June.

Economists had expected building permits to tumble by 2.1 percent to an annual rate of 1.650 million from the 1.685 million originally reported for the previous month.

A report on retail sales is likely to attract attention on Wednesday along with the minutes of the latest Fed meeting, which may shed additional light on the outlook for interest rates.

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