Treasuries Pull Back Off Best Levels But Still Close Modestly Higher

(RTTNews) - After showing a strong move to the upside in early trading on Monday, treasuries gave back some ground but still closed modestly higher.

Bond prices pulled back well off their best levels in afternoon trading but managed to end the day in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.8 basis points to 2.634 percent.

With the modest drop on the day, the ten-year yield partly offset the gain posted last Friday, remaining stuck in a recent trading range.

The early strength among treasuries was partly due to worries about the ongoing government shutdown, as lawmakers failed to make any progress on resolving the impasse over a spending bill.

Appearing on ABC's "This Week with George Stephanopoulos" on Sunday, House Speaker John Boehner, R-Ohio, claimed that the House does not have the votes to pass a "clean" spending bill.

Boehner sought to put the blame for the shutdown on President Barack Obama, arguing that the president's unwillingness to negotiate is increasing the risk of a government default.

However, Democrats refuted Boehner's claim that the House could not pass a "clean" government spending bill, daring the Republican leader to bring the legislation to the floor.

"If Republicans and Speaker Boehner are saying there are not enough votes, then they should prove it," Obama said in remarks at FEMA's National Response Coordination Center on Monday.

"My very strong suspicion is there are enough votes there," he added. "Hold a vote. Call a vote right now, and let's see what happens."

Nonetheless, buying interest remained somewhat subdued amid expectations that lawmakers will reach an agreement before next week's debt ceiling deadline.

Amid a quiet day on the U.S. economic front, traders are likely to keep a close eye on any developments in Washington on Tuesday.

Bond trading could also be impacted by the release of the results of the Treasury Department's auction of $30 billion worth of three-year notes.