Treasuries Close Modestly Higher But Off Best Levels

(RTTNews) - Treasuries moved modestly higher over the course of the trading session on Monday, although activity was somewhat subdued amid a lack of major U.S. economic data.

After moving to the upside in morning trading, bond prices gave back some ground in the afternoon but still closed higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.8 basis points to 2.714 percent.

The modest strength among treasuries came as comments from two Federal Reserve officials suggested that the central bank is in no hurry to begin scaling back its stimulus program.

New York Fed President William Dudley said the economy still needs the support of very accommodative monetary policy, citing concerns about the rise in longer-term interest rates.

"Improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly canceling each other," Dudley said.

Dudley also suggested that the Fed cannot begin tapering its asset purchase program until there is more confidence that the improvement in the labor market will continue.

Atlanta Fed President Dennis Lockhart expressed similar sentiments in a separate speech, expressing concern about the lower labor participation rate.

Meanwhile, Dallas Fed President Richard Fisher conveyed a more hawkish tone in a speech in San Antonio, arguing that the Fed should have voted to taper at last week's meeting.

Fisher, a non-voting member of the FOMC, claimed that the decision to maintain the stimulus program intact despite signals otherwise undermined the Fed's credibility.

Looking ahead to Tuesday, traders are likely to keep a close eye on reports on U.S. home prices and consumer confidence.