Treasuries Pull Back Off Early Highs But Continue To See Modest Strength

(RTTNews) - After advancing early in the session, treasuries have given back ground over the course of the trading day on Tuesday.

Bond prices have pulled back well off their highs but remain positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, has dipped 2.1 basis points to 5.115 percent after hitting a low of 5.073 percent.

The early strength among treasuries came following the release of weaker-than-expected housing data, with separate reports showing steep drops in new residential construction and pending home sales.

Early in the day, the Commerce Department released a report unexpectedly showing an extended nosedive in new residential construction in the U.S. in the month of September.

The Commerce Department said housing starts plunged by 5.2 percent to an annual rate of 1.221 million in September after plummeting by 5.9 percent to a revised rate of 1.288 million in August.

The continued slump came as surprise to economists, who had expected housing starts to jump by 2.4 percent to an annual rate of 1.305 million from the 1.275 million originally reported for the previous month.

The Commerce Department also said building permits dipped by 0.2 percent to an annual rate of 1.400 million in September after tumbling by 2.1 percent to a revised rate of 1.403 million in August.

Building permits, an indicator of future housing demand, were expected to fall by 0.5 percent to an annual rate of 1.387 million from the 1.394 million originally reported for the previous month.

Single family permits plunged by 4.0 percent to an annual rate of 845,000, more than offsetting a 6.1 percent surge in multi-family permits to an annual rate of 555,000.

A separate report released by the National Association of Realtors showed pending home sales in the U.S. plunged by much more than expected in the month of September.

NAR said its pending home sales plummeted by 7.3 percent to 66.0 in September after rising by 0.3 percent to 71.2 in August. Economists had expected pending home sales to fall by 0.4 percent.

Treasuries also benefitted from a substantial downturn by the price of crude oil, with U.S. crude oil futures tumbling by 2.5 percent after skyrocketing earlier in the day.

The sharp pullback by crude oil partly reflected a report by Al-Araby Al-Jadeed indicating negotiators from Qatar and Pakistan have presented a compromise proposal to end the U.S.-Iran war.

The report added that Tehran agreed to allow a visit by the International Atomic Energy Agency to Iran's nuclear sites.

Though the U.S. nor Iran confirmed the report, the agency cited a source stating that a breakthrough to halt the escalation of the conflict between the U.S. and Iran could be announced possibly this week.

However, hours later, citing a diplomat involved in the negotiations, different news sources mentioned that even though U.S.-Iran talks are underway, reports indicating that a deal is close are wrong.