Treasuries Extend Recovery Ahead Of Fed Announcement

(RTTNews) - Extending the recovery seen over the past few sessions, treasuries moved moderately higher over the course of the trading day on Tuesday.

After seeing initial strength, bond prices pulled back near the unchanged line before moving back to the upside once again. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid by 4 basis points to 2.318 percent.

With the drop on the day, the ten-year yield continued to pull back off the eight-month closing high set last Wednesday.

Treasuries continued to benefit from their appeal as a safe haven amid concerns about the situation in Greece, as the debt-laden country remains at an impasse with its international creditors.

In a statement to the Efimerida Ton Syntakton newspaper, Greek Prime Minister Alexis Tsipras accused his country's creditors of "pillaging" Greece and suggested their motives are political.

"The Greek government is negotiating with a plan and has presented nuanced counterproposals," Tsipras said. "We will patiently wait for the institutions to adhere to realism."

The inability of the two sides to reach a compromise has led to worries about a potential Greek default at the end of the month.

Traders were also looking ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

The Fed is not expected to announce an increase in interest rates due to some recent signs of economic sluggishness, but traders will be paying close attention to any hints regarding the timing of the first rate hike.

The monetary policy statement will be accompanied by a press conference by Fed Chair Janet Yellen as well as the central bank's latest forecasts.

On the U.S. economic front, the Commerce Department released a report showing a bigger than expected pullback in housing starts in the month of May.

The Commerce Department said housing starts tumbled 11.1 percent to an annual rate of 1.036 million in May after jumping 22.1 percent to a seven-year high of 1.165 million in April. Economists had expected starts to drop to an annual rate of 1.090 million.

Meanwhile, the report also said building permits, an indicator of future housing demand, jumped 11.8 percent to an annual rate of 1.275 million in May from the revised April rate of 1.140 million.

The increase in building permits came as a surprise to economists, who had expected permits to drop to a rate of 1.105 million.

"Permits were unexpectedly strong in May," said Jennifer Lee, senior economist at BMO Capital. "That alone points to stronger residential construction activity ahead."

The Fed statement will be the primary focus on Wednesday, although traders may also keep an eye on the latest news out of Greece.