Treasuries Close Sharply Higher Amid Focus On Europe

(RTTNews) - Treasuries moved sharply higher during trading on Wednesday, extending the upward move seen over the course of the previous session.

Bond prices showed a strong move to the upside in early trading and remained firmly positive throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 8 basis points to 2.438 percent.

With the steep drop on the day, the ten-year yield closed lower for the third straight session, falling to an eleven-month closing low.

The rally by treasuries came as traders focused on developments in Europe amid a lack of major U.S. economic data.

An unexpected jump in German unemployment reinforced expectations of further stimulus, leading to strength among European bonds as well as follow-through in the U.S. bond markets.

The European Central Bank is scheduled to hold a monetary policy meeting next Thursday and is expected to announce new measures to boost the sluggish economy.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $35 billion worth of five-year notes.

The five-year note auction drew a high yield of 1.513 percent and a bid-to-cover ratio of 2.73, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.65.

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

Peter Boockvar, managing director at the Lindsey Group, said, "With a yield at the lowest level in almost 3 months, the 5-year note auction was uneventful following the ordinary 2-year note auction yesterday."

U.S. economic data may attract some attention on Thursday, with traders likely to keep an eye on reports on weekly jobless claims and pending home sales as well as a revised reading on first quarter GDP.

Additionally, the Treasury is due to sell $29 billion worth of seven-year notes, finishing off this week's series of long-term securities auctions.