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Treasuries Close Roughly Flat For Second Consecutive Session

Treasuries came under pressure in early in the session on Monday but regained ground over the course of the trading day.

Bond prices climbed well off their early lows, closing roughly flat for the second consecutive session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 4.632 percent after reaching a high of 4.696 percent..

The early weakness among treasuries came in reaction to news credit rating agency Moody’s has lowered its outlook for the U.S.’ credit rating to negative from stable amid concerns about a possible government shutdown.

Moody’s reaffirmed the U.S. credit rating at Aaa but said it “expects that the U.S.’ fiscal deficits will remain very large, significantly weakening debt affordability.”

The selling pressure was partly offset by a report from the New York Federal Reserve showing a modest decrease in consumer inflation expectations.

The New York Fed said inflation expectations declined at the one-year and five-year ahead horizons in October, falling to 3.6 percent from 3.7 percent and to 2.7 percent from 2.8 percent, respectively.

Overall trading activity remained somewhat subdued, however, as traders looked ahead to the release of key inflation data in the coming days.

The inflation data could have a significant impact on the outlook for interest rates, with traders recently expressing optimism the Federal Reserve is done raising rates.

Trading on Tuesday is likely to be driven by reaction to the Labor Department’s report on consumer price inflation in the month of October.

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