Treasuries Close Notably Lower For Second Straight Session

(RTTNews) - Following the sharp pullback seen in the previous session, treasuries saw some further downside over the course of the trading day on Tuesday.

After coming under pressure in early trading, bond prices regained some ground only to pull back going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.9 basis points to 2.409 percent.

The late-day weakness among treasuries was partly in reaction to the results of the Treasury Department's auction of $26 billion worth of two-year notes, which attracted below average demand.

The two-year note auction drew a high yield of 0.692 percent and a bid-to-cover ratio of 3.28, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.44.

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

Selling pressure was seen earlier in the day as traders digested the latest U.S. economic data, including a report from the Commerce Department showing that new home sales climbed to a seven-year high in May.

The report said new home sales rose 2.2 percent to an annual rate of 546,000 in May after surging up 8.1 percent to the revised April rate of 534,000.

Economists had expected new home sales to rise to a rate of 525,000 from the 517,000 originally reported for the previous month, reflecting a 1.5 percent increase.

With the bigger than expected increase, new home sales reached their highest level since hitting a rate of 593,000 in February of 2008.

A separate Commerce Department report showed a bigger than expected drop in durable goods orders in May, although the decrease was largely due to weakness in the volatile transportation sector.

The report said durable goods orders tumbled by 1.8 percent in May following a revised 1.5 percent decrease in April. Economists had expected orders to dip by 0.6 percent.

However, excluding a steep drop in orders for transportation equipment, durable goods orders rose by 0.5 percent in May after falling by 0.3 percent in April. The increase matched economist estimates.

The final report on first quarter GDP may attract some attention on Wednesday along with any developments regarding the situation in Greece.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $35 billion worth of five-year notes.