Treasuries Climb Off Early Lows But Remain In The Red

(RTTNews) - After recovering from early weakness to end the previous session roughly flat, treasuries moved back to the downside during trading on Tuesday.

Bond prices regained ground after coming under pressure in early trading but remained in the red. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 3.1 basis points to 4.300 percent.

The weakness among treasuries may have reflected profit taking following recent strength, which saw the ten-year yield close lower for four consecutive sessions.

Selling pressure waned over the course of the session, however, as traders reacted to Federal Reserve Chair Jerome Powell's testimony before the Senate Banking Committee.

Powell told the committee more good data would strengthen the central bank's confidence inflation is moving sustainably toward its 2 percent target and lead to a potential interest rate cut.

"The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent," Powell said in prepared remarks.

"Incoming data for the first quarter of this year did not support such greater confidence," he continued. "The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent."

Powell's remarks come as a report released by the Commerce Department late last month showed the annual rate of growth by core consumer prices, which exclude food and energy prices, slowed to 2.6 percent in May from 2.8 percent in April.

On Thursday, the Labor Department is scheduled to release its report on consumer price inflation in the month of June.

Economists expect the annual rate of consumer price growth to slow to 3.1 percent in June from 3.3 percent in May, while the annual rate of core consumer price growth is expected to hold at 3.4 percent.

The Fed Chair also warned of the risk that leaving interest rates at an elevated level for too long could jeopardize economic growth.

"In light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face," Powell said. "Reducing policy restraint too late or too little could unduly weaken economic activity and employment."

Trading activity on Wednesday may be somewhat subdued as traders look ahead to the release of the highly anticipated report on consumer price inflation on Thursday.