Treasuries Move To The Upside Following Strong Twenty-Year Bond Auction

(RTTNews) - Treasuries showed a lack of direction for much of the trading session on Tuesday but eventually managed to end the day moderately higher.

Bond prices spent of the day lingering near the unchanged line before moving to the upside in the latter part of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.5 basis points to 4.281 percent.

Buying interest emerged in afternoon trading after the Treasury Department revealed this month's auction of $13 billion worth of twenty-year bonds attracted well above average demand.

The twenty-year bond auction drew a high yield of 4.632 percent and a bid-to-cover ratio of 2.78, while the ten previous twenty-year bond auctions had an average bid-to-cover ratio of 2.56.

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

Treasuries may also have benefitted from ongoing concerns about the economic outlook despite the release of some upbeat economic data.

The Federal Reserve released a report this morning showing industrial production in the U.S. increased by much more than expected in the month of January.

The report said industrial production climbed by 0.7 percent in February after climbing by a downwardly revised 0.3 percent in January.

Economists had expected industrial production to rise by 0.2 percent compared to the 0.5 percent growth originally reported for the previous month.

The Commerce Department also released a report showing new residential construction rebounded by much more than anticipated in the month of February.

Meanwhile, traders were also looking ahead to the Federal Reserve's latest monetary policy announcement on Wednesday.

While the Fed is almost universally expected to leave interest rates unchanged, traders will look to the accompanying statement as well as officials' latest projections for clues about the outlook for rates.

The Fed's monetary policy announcement is likely to be in focus on Wednesday amid an otherwise quiet day on the U.S. economic front.