Treasuries Move Sharply Lower On Bank Of Japan Policy Shift

(RTTNews) - After moving sharply lower over the two previous sessions, treasuries saw further downside during trading on Tuesday.

Bond prices came under pressure in early trading and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.3 basis points to 3.684 percent.

The continued weakness among treasuries came after the Bank of Japan said it would review its yield curve control policy and widened its target band for interest rates.

Analysts said the surprise policy shift would allow long-term interest rates to rise more, raising fears of an eventual tightening in policy.

Concerns about the outlook for U.S. interest rates also continue to weigh on treasuries, with the Federal Reserve signaling last week that it intends on continuing to raise rates next year.

On Friday, the Commerce Department is due to release its report on personal income and spending, which includes a reading on inflation said to be preferred by the Fed.

With Fed Chair Jerome Powell saying the central bank will require "substantially more evidence" inflation is on a sustained downward trend before halting its rate hikes, traders are likely to keep a close eye on the inflation reading. In U.S. economic news, the Commerce Department released a report showing a decrease in new residential construction in the U.S. in the month of November.

The report said housing starts fell by 0.5 percent to an annual rate of 1.427 million in November after tumbling by 2.1 percent to a revised rate of 1.434 million in October.

Economists had expected housing starts to decline by 0.7 percent to a rate of 1.415 million from the 1.425 million originally reported for the previous month.

The Commerce Department also said building permits plunged by 11.2 percent to an annual rate of 1.342 million in November after slumping by 3.3 percent to a revised rate of 1.512 million in October.

Building permits, an indicator of future housing demand, were expected to dive by 3.7 percent to 1.470 million from the 1.526 million originally reported for the previous month.

Looking ahead, trading on Wednesday may be impacted by reaction to reports on consumer confidence and existing home sales.