Treasuries Close Modestly Lower After Seeing Initial Strength

(RTTNews) - After an early move to the upside, treasuries moved modestly lower over the course of the trading session on Wednesday.

Bond prices pulled back off their early highs in morning trading and moved roughly sideways before dipping going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.5 basis points to 3.095 percent.

With the modest uptick on the day, the ten-year yield extended the strong upward move seen on Tuesday, reaching its highest closing level since July of 2011.

Treasuries initially benefited from geopolitical concerns after North Korea threatened to cancel an historic meeting between leader Kim Jong Un and President Donald Trump.

In a statement published by the state-run Korean Central News Agency, North Korean First Vice Minister of Foreign Affairs Kim Kye Gwan suggested that Trump must accept the reclusive communist country as a nuclear power.

"If the U.S. is trying to drive us into a corner to force our unilateral nuclear abandonment, we will no longer be interested in such dialogue and cannot but reconsider our proceeding to the DPRK-U.S. summit," Kim said.

Kim pointed to "unbridled remarks" by U.S. officials such as National Security Adviser John Bolton calling on North Korea to abandon nuclear weapons first and be compensated afterward.

The statement from Kim came after North Korea canceled high-level talks with South Korea planned for Wednesday over U.S.-South Korean military drills.

Despite the threats, White House Press Secretary Sarah Sanders said the administrations remains hopeful the meeting will take place.

Treasuries pulled back as traders digested a report from the Federal Reserve showing a slightly bigger than expected increase in industrial production in the month of April.

The Fed said industrial production climbed by 0.7 percent in April, matching the upwardly revised increase in March. Economists had expected industrial production to rise by 0.6 percent.

Meanwhile, a separate report from the Commerce Department showed a sharp pullback in new residential construction in the month of April.

The report said housing starts plunged by 3.7 percent to an annual rate of 1.287 million in April after jumping by 3.6 percent to an upwardly revised 1.336 million in March.

Economists had expected housing starts to drop to an annual rate of 1.310 million from the 1.319 million originally reported for the previous month.

The Commerce Department said building permits also tumbled by 1.8 percent to an annual rate of 1.352 million in April after surging up by 4.1 percent to an upwardly revised 1.377 million in March.

Building permits, an indicator of future housing demand, had been expected to edge down to 1.350 million from the 1.354 million originally reported for the previous month.

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims, leading economic indicators, and Philadelphia-area manufacturing activity.

The Treasury Department is also due to announce the details of next week's auctions of two-year, five-year, and seven-year notes.