2019.06.1815:25:00UTC+00Treasuries Pull Back Off Best Levels But Remain Positive

After an initial move to the upside, treasures gave back some ground but managed to end Tuesday's trading firmly in positive territory.

Bond prices moved roughly sideways in afternoon trading following a volatile morning. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to 2.06 percent.

The ten-year yield rebounded after hitting an intraday low of 2.029 percent but still ended the session at its lowest closing level in over two years.

Treasuries moved sharply higher at the open as traders looked ahead to the Federal Reserve's monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged but could signal plans to cut rates as soon as its next meeting at the end of July.

Fed Chairman Jerome Powell's recent pledge to act "as appropriate" to support the U.S. economic expansion has led to widespread speculation the central will lower rates in the near future.

President Donald Trump has been urging the Fed to lower rates and may ramp up pressure on the central bank after European Central Bank President Mario Draghi suggested he could provide additional stimulus.

Noting the subsequent drop in the value of the euro against the U.S. dollar, Trump called Draghi's comments "unfair" to the U.S., adding, "They have been getting away with this for years, along with China and others."

However, treasuries pulled back off their early highs after Trump said in a post on Twitter that he had a "very good" telephone conversation with Chinese President Xi Jinping and will have an "extended meeting" at the G20 summit next week.

"Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting," Trump tweeted.

The tweet from Trump has led to renewed optimism that the U.S. and China could finally reach an agreement to end their long-running trade dispute.

Trump had previously threatened to raise tariffs on another $300 billion worth of Chinese goods if Xi did not attend the G20 summit.

The Fed is likely to be in the spotlight on Wednesday, with traders keeping a close eye on the accompanying statement and Powell's subsequent press conference.