Treasuries Close Modestly Lower After Seeing Early Strength

(RTTNews) - After failing to sustain an initial upward move, treasuries turned lower over the course of the trading day on Monday and closed in the red.

Bond prices pulled back well off their early highs before ending the day modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by less than a basis point to 2.877 percent after hitting a low of 2.839 percent.

The downturn by treasuries came as traders digested the latest batch of U.S. economic data, including a report from the Federal Reserve showing that industrial production rose by much more than expected in the month of November.

The report said industrial production surged up by 1.1 percent in November compared to economist estimates for an increase of about 0.6 percent.

A separate report from the New York Fed showed that its index of regional manufacturing activity returned to positive territory in December, while the Labor Department reported an upward revision to third quarter productivity growth.

The largely positive data led some economists to predict that the Fed will began scaling back its asset purchases at its monetary policy meeting this week.

Joel Naroff, President and Chief Economist at Naroff Economic Advisors, said, "The data have turned fairly consistently stronger and the Fed is likely to start the process of getting out of the quantitative easing business by the end of the winter."

"Whether the start date is this Wednesday (I don't think so but it is possible) or next year at either the January or March meeting is unclear, but it is coming," he added.

The Fed is scheduled to begin its two-day monetary policy meeting on Tuesday and announce its decision Wednesday afternoon.

Trading on Tuesday may be impacted by the release of reports on consumer prices and homebuilder confidence, although activity is likely to be subdued as traders await the Fed decision.