Treasuries experienced mixed movement early in the trading day on Tuesday but showed notable strength in the last half hour of trading.
While some investors moved into the stock market to pick up bargains after a pullback in the previous session, other traders considered the safety of bonds late in the day, unsure of near-term prospects on the heels of worse-than-expected economic data.
The late-session move into treasuries also came as investors looked forward to tomorrow's influx of economic data, as today's figures may have served as precursor for Wednesday's reports from the housing, manufacturing and labor sectors.
After seeing some early weakness, the benchmark ten-year note showed a lack of conviction for much of the day but moved decidedly to the upside in the afternoon. Subsequently, the yield on the ten-year note closed down 2.9 basis points at 2.685 percent.
For the quarter, the benchmark ten-year note saw substantial weakness, resulting in a 60.5 basis point gain for the yield on the note.
Looking ahead to Wednesday, traders will consider data from the housing sector on pending home sales. Last month, the figure dipped 7.7 percent, another indication that the housing market has not yet found a bottom. Traders have marked the sector as one to watch as an indicator of any economic recovery.
In addition, data on auto sales due out during tomorrow's session will be especially closely watched as trader concern continues about the sector with the prospect of a bankruptcy filing by General Motors (GM) or Chrysler.
Last month's numbers showed auto sales declined from 6.8 million on an annual rate to 6.4 million. Analysts are expecting tomorrow's figures to hold steady at 6.4 million.
Investors will also digest the Institute for Supply Management's report on national manufacturing levels. The index of activity in the sector is expected to edge up to 36.0, but a reading below 50 would indicate a continued contraction in the sector.
In connection with the upcoming data, traders digested Tuesday's figures on business activity from the Chicago-area, which came in worse than expected. The numbers concerned economists as the figures are often indicative of national manufacturing data.
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