Treasuries Extend Pullback As Fed Decision Looms

(RTTNews) - On the heels of the sharp pullback seen in the previous session, treasuries saw some further downside during trading on Tuesday.

Bond prices showed a notable drop in early trading and remained stuck firmly in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.3 basis points to 2.268 percent.

With the increase on the day, the ten-year yield continued to regain ground after ending last Friday's trading at its lowest closing level in well over a month.

The continued weakness among treasuries came as traders looked ahead to the Federal Reserve's monetary policy announcement scheduled for tomorrow afternoon.

The Fed is widely expected to raise interest rates, but traders are likely to pay close attention to the wording of the accompanying statement to gain clues about the outlook for policy.

On the economic front, the Labor Department released a report this morning showing that consumer prices were flat in the month of November.

The Labor Department said its consumer price index was unchanged in November after rising by 0.2 percent in October. The flat reading matched economist estimates.

Excluding food and energy prices, the core consumer price index rose by 0.2 percent in November, matching the increases seen in the two previous months as well as expectations.

The National Association of Home Builders also released a report showing an unexpected deterioration in homebuilder confidence in the month of December.

The report said the NAHB/Wells Fargo Housing Market Index edged down to 61 in December from 62 in November. The drop surprised economists, who had expected the index to inch up to 63.

A separate report from the New York Federal Reserve showed that regional manufacturing activity contracted for the fifth straight month in December, although the pace of decline slowed more than expected.

The Fed decision will be in the spotlight on Wednesday, likely overshadowing reports on housing starts and industrial production.