Treasuries Close Firmly Positive After Seeing Early Weakness

(RTTNews) - After coming under pressure in early trading, treasuries showed a notable turnaround over the course of the trading session on Wednesday.

Bond prices climbed well off their early lows, ending the day firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day down by 4.9 basis points at 2.671 percent.

The turnaround by treasuries came as traders continued to focus on the latest developments regarding the fiscal crisis in Washington.

With just one day to go before a potential default, Senate leaders announced an agreement to fund the government through January 15th and extend the debt limit through February 7th.

Additionally, the legislation includes instructions for the Congressional leadership to name conferees to a budget conference committee.

Senate Majority Leader Harry Reid described the deal as a "historic, bipartisan agreement to reopen the government and avert a default on the nation's bills."

While votes on the agreement are still needed, House Speaker John Boehner recently indicated that Republicans won't block the Senate plan.

Amid the focus on Washington, traders largely shrugged off a report from the National Association of Home Builders showing an unexpected drop in homebuilder confidence.

The report said the NAHB/Wells Fargo Housing Market Index dropped to 55 in October from a downwardly revised 57 in September. Economists had expected the index to come in unchanged compared to the 58 originally reported for the previous month.

NAHB Chief Economist David Crowe attributed the unexpected decrease to a spike in mortgage interest rates along with the paralysis in Washington.

Trading on Thursday is likely to be impacted by this evening's developments in Washington and whether the Senate agreement receives final approval in both houses of Congress.

The news from Capitol Hill is likely to overshadow the release of reports on weekly jobless claims and Philadelphia-area manufacturing activity.