After initially moving to the upside, treasuries moved modestly lower over the course of the trading session on Monday.
Bond prices pulled back well off their early highs and firmly into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 1.811 percent after hitting a low of 1.766 percent.
The downturn by treasuries may partly have reflected profit taking, with traders cashing in on recent strength as the ten-year yield hit its lowest level in a month.
Treasuries initially benefited from their appeal as a safe haven amid an escalating war of words between Washington and Tehran after the U.S. killing of top Iranian military commander Qasem Soleimani in an airstrike last week.
With Iran’s Supreme Leader Ali Khamenei vowing “severe revenge” against the U.S., President Donald Trump threatened to retaliate against any attacks on Americans or American assets.
Trump said the U.S. has targeted 52 Iranian sites to strike if Tehran launches an attack, with the number representing the 52 American hostages held during the Iran hostage crisis.
Meanwhile, Trump also threatened to impose harsh sanctions on Iraq after its parliament passed a resolution calling on U.S. forces to leave the country.
“If they do ask us to leave, if we don’t do it in a very friendly basis, we will charge them sanctions like they’ve never seen before ever,” Trump told reporters on Sunday. “It’ll make Iranian sanctions look somewhat tame.”
However, traders seem optimistic that the bluster will not amount to much and that tensions will eventually subside without a major impact on the global economy.
A lack of major U.S. economic data also kept some traders on the sidelines ahead of the release of the closely watched monthly jobs report on Friday.
Reports on the U.S. trade deficit, service sector activity and factory orders may attract some attention on Tuesday, although traders are also likely to keep an eye out for news out of the Middle East.
Bond trading could also be impacted by reaction to the results of the Treasury Department’s auction of $38 billion worth of three-year notes.
The material has been provided by InstaForex Company – www.instaforex.com