After showing a strong move to the upside in early trading on Tuesday, treasuries gave back ground over the course of the session.
Bond prices pulled back well off their early highs, ending the day near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.807 percent.
The initial strength among treasuries was partly due to a notable pullback by the price of crude oil, with crude for March delivery tumbling $2.66 to $46.47 a barrel.
Ongoing concerns about the global economy weighed on the price of crude oil and boosted treasuries following news that the International Monetary Fund downgraded its global growth outlook.
Citing weak investment in many advanced and emerging market economies, the IMF said the global economy is expected to grow 3.5 percent this year, down from the 3.8 percent expansion projected in October. Growth in 2016 is projected to be 3.7 percent instead of 4 percent.
Treasuries also benefited from the release of a report from the National Association of Home Builders showing a modest deterioration in U.S. homebuilder confidence in the month of January.
Nonetheless, traders seemed somewhat reluctant to continue buying treasuries following the recent strength in the bond markets.
Anxiety ahead of the European Central Bank’s monetary policy announcement on Thursday may also have kept some traders on the sidelines.
Many analysts expect the ECB to expand its quantitative easing program, particularly after last week’s surprise move by the Swiss National Bank.
The subsequent pullback by treasuries came amid a rebound by stocks, which moved back to the upside after coming under pressure in early trading.
A report on U.S. housing starts may attract some attention on Wednesday, although activity may be somewhat subdued as the ECB announcement looms.
The material has been provided by InstaForex Company – www.instaforex.com