WASHINGTON (dpa-AFX) - After moving higher over the course of the previous session, treasuries gave back some ground during trading on Tuesday.
Bond prices climbed well off their worst levels after an early pullback but still ended the day modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.7 basis points to 4.019 percent.
The early weakness among treasuries came as traders continued to express some uncertainty about the outlook for interest rates.
While the Federal Reserve is widely expected to leave interest rates unchanged later this month, traders have recently become increasingly skeptical about whether the central bank will cut rates in March.
CME Group's FedWatch Tool still indicates a 60.9 percent chance the Fed will lower rates by a quarter point in March, but that figure is well below recent highs.
Treasuries recovered from the initial pullback but moved back to the downside after the Treasury Department revealed this month's auction of $52 billion worth of three-year notes attracted slightly below average demand.
The three-year note auction drew a high yield of 4.105 percent and a bid-to-cover ratio of 2.67, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.71.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Trading activity may be somewhat subdued on Wednesday amid a relatively quiet day on the U.S. economic front.
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