Treasuries Close Modestly Lower Amid Lingering Taper Worries

(RTTNews) - Treasuries moved modestly lower during trading on Tuesday, extending the substantial downward move that was seen last Friday.

After moving to the downside in early trading, bond prices fluctuated as the day progressed but remained in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.7 basis points to 2.768 percent.

With the modest increase on the day, the ten-year yield added to the 13.3 basis point gain posted last Friday, reaching its highest closing level in over a month.

The modest weakness among treasuries was partly due to lingering concerns about the outlook for the Federal Reserve's stimulus program.

Worries about the Fed tapering sooner than anticipated were heightened by remarks from Atlanta Fed President Dennis Lockhart.

In an interview with Bloomberg News, Lockhart suggested that the Fed's decision to begin paring back its asset purchase program "could very well take place" at its meeting next month.

However, Lockhart also noted that he would like to see inflation move toward the central bank's 2 percent target before tapering begins.

Minneapolis Fed President Narayana Kocherlakota expressed support for maintaining the stimulus program in separate remarks, arguing that tapering too soon would be a drag on the economy.

Kocherlakota said the timing of the conversation about tapering was "puzzling" and claimed the Fed should do "whatever it takes" to achieve its goals.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $30 billion worth of three-year notes.

The three-year note auction drew a high yield of 0.644 percent and a bid-to-cover ratio of 3.46, while the ten previous three-year note auctions had a bid-to-cover ratio of 3.32.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

While Wednesday represents another quiet day on the U.S. economic front, bond traders are likely to keep an eye on the results of the Treasury's auction of $24 billion worth of ten-year notes.