Treasuries Pull Back Sharply Amid Optimism About Greece

(RTTNews) - After trending higher over the past several sessions, treasuries showed a notable move back to the downside during trading on Monday.

Bond prices came under pressure in morning trading and remained firmly in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.3 basis points to 2.36 percent.

The sharp pullback by treasuries largely reflected optimism that Greece will finally reach an agreement with its international creditors.

Greece has reportedly submitted a new proposal that could lead to progress and allow the debt-laden country to avoid a default.

Jonathan Loynes, Chief European Economist at Capital Economics, said, "The optimism stems from new proposals advanced by Greece over the weekend, which reportedly cross the previous 'red lines' of pension cuts and VAT rises."

"In exchange, Greece's creditors have apparently indicated that they are prepared to meet the Greek government's demands for some sort of debt relief to be included in an extension to the current bailout or a third program," he added.

Adding to the optimism, Eurogroup President Jeroen Dijsselbloem described the Greek proposal as a positive step and said an agreement could be reached later this week.

The latest signs of progress come as Greece has indicated that it will be unable to make a 1.5 billion euro payment to the International Monetary Fund at the end of the month without further aid.

Selling pressure was also generated by a report from the National Association of Realtors showing that existing home sales jumped to their highest level in almost six years in May.

The report said existing home sales surged up by 5.1 percent to an annual rate of 5.35 million in May from an upwardly revised 5.09 million in April. Economists had expected existing home sales to climb to an annual rate of 5.25 million.

With the bigger than expected increase, existing home sales rose to their highest level since reaching 5.44 million in November of 2009.

News regarding the situation in Greece is likely to remain in focus on Tuesday along with the release of reports on durable goods orders and new home sales.

Bond trading could also be impacted by reaction to the results of the Treasury Department's auction of $26 billion worth of two-year notes.