Treasuries Move Back To The Downside Following Recent Strength

(RTTNews) - After trending higher throughout the previous week, treasuries showed a notable move back to the downside during trading on Monday.

Bond prices came under pressure in early trading but moved roughly sideways before seeing further downside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 5.4 basis points to 2.699 percent.

The pullback by treasuries came as traders moved out of safe havens such as bonds as the referendum in Ukraine's Crimea region passed without major violence.

According to local officials, the people of the semi-autonomous Crimea region overwhelmingly voted to secede and become part of Russia.

However, President Barack Obama has said the vote will never be recognized by the U.S. and the international community, arguing that the referendum violated the Ukrainian constitution and occurred under duress of Russian military intervention.

Obama announced this morning that the U.S. is imposing sanctions on certain Russian government officials as well as Crimea-based separatist leaders.

Meanwhile, bond traders largely shrugged off a report from the Federal Reserve showing a stronger than expected rebound in industrial production in the month of February.

The Fed said industrial production increased by 0.6 percent in February following a revised 0.2 percent drop in January. Economists had been expecting production to rise by about 0.2 percent.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "Assuming that the weather returns to seasonal norms, output will rise rapidly in the coming months."

"One risk is that the political events in Ukraine and the economic developments in China prompt an easing in overseas demand," he added. "But we're not convinced this will prevent industrial production from rising at a decent rate this year."

A separate report from the National Association of Home Builders showed a much smaller than expected rebound by its reading on homebuilder confidence.

Trading on Tuesday could be impacted by the release of reports on housing starts and consumer price inflation, although activity may be somewhat subdued ahead of the Fed's monetary policy announcement on Wednesday.