Following the strength seen in the previous session, treasuries showed a notable move back to the downside during trading on Wednesday.
Bond prices initially moved lower and slid more firmly into negative territory as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed by 3.5 basis points to 2.928 percent.
The pullback by treasuries may have reflected comments by Federal Reserve Chairman Jerome Powell, who said the case for further increases in interact rates is “strong.”
“Earlier in the expansion, as the economy recovered, the need for highly accommodative monetary policy was clear,” Powell said at a European Central Bank forum in Portugal.
He added, “But with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong.”
Meanwhile, traders largely shrugged off the concerns about a trade war been the U.S. and China that contributed to the strength on Tuesday.
President Donald Trump has directed U.S. Trade Representative Robert Lighthizer to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.
Trump said the tariffs will go into effect if China refuses to change its unfair trade practices and insists on going forward with recently announced tariffs.
The president threatened to pursue additional tariffs on another $200 billion worth of goods if China increases its tariffs yet again.
Despite the threat from Trump, China vowed to retaliate with “strong” countermeasures if the U.S. goes ahead with the new tariffs.
On the U.S. economic front, the National Association of Realtors released a report showing an unexpected decrease in existing home sales in the month of May.
NAR said existing home sales fell by 0.4 percent to an annual rate of 5.43 million in May after plunging by 2.7 percent to a downwardly revised 5.45 million in April.
The drop surprised economists, who had expected existing home sales to climb to an annual rate of 5.52 million from the 5.46 million originally reported for the previous month.
Trading on Thursday may be impacted by reaction to reports on initial jobless claims, leading economic indicators, and Philadelphia-area manufacturing activity.
Bond traders are also likely to keep an eye on the Treasury Department’s announcement of the details of next week’s auctions of two-year, five-year, and seven-year notes.