2019.03.2615:20:00UTC+00Treasuries Recover From Initial Weakness To Close Roughly Flat

After showing an initial move to the downside, treasuries regained ground over the course of the trading session on Tuesday.

Bond prices climbed well off their worst levels of the day but closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.414 percent after reaching a high of 2.448 percent.

The initial weakness among treasuries came as traders cashed in on the strong upward move shown by bonds over the past few sessions.

Selling pressure waned over the course of the morning, however, as traders digested another batch of disappointing U.S. economic data.

Early in the day, the Commerce Department released a report showing a sharp pullback in new residential construction in the month of February.

The report said housing starts plunged by 8.7 percent to an annual rate of 1.162 million in February after surging up by 11.7 percent to a revised rate of 1.273 million in January.

Economists had expected housing starts to dip to a rate of 1.213 million from the 1.230 million originally reported for the previous month.

The Commerce Department said building permits also fell by 1.6 percent to an annual rate of 1.296 million in February after dipping by 0.7 percent to a revised rate of 1.1317 million in January.

Building permits, an indicator of future housing demand, had been expected to drop to 1.300 million from the 1.345 million originally reported for the previous month.

A separate report from the Conference Board showed an unexpected decrease in consumer confidence in the month of March.

The Conference Board said its consumer confidence index dropped to 124.1 in March after jumping to 131.4 in February. Economists had expected the index to rise to 133.0.

"Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report," said Lynn Franco, Senior Director of Economic Indicators at the Conference Board.

"Despite these dynamics, consumers remain confident that the economy will continue expanding in the near term," she added. "However, the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth."

Treasuries continued to regain ground following the release of the results of the Treasury Department's auction of $40 billion worth of two-year notes, which attracted slightly below average demand.

The two-year note auction drew a high yield of 2.261 percent and a bid-to-cover ratio of 2.60, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.67.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Looking ahead, the Treasury is due to sell $41 billion worth of five-year notes on Wednesday and $32 billion worth of seven-year notes on Thursday.

Trading on Wednesday may also be impacted by reaction to the Commerce Department's report on the U.S. trade deficit in January.