Treasuries Pull Back Sharply After 30-Year Bond Auction, Powell Remarks

(RTTNews) - Treasuries showed a significant move to the downside during trading on Thursday, giving back ground after moving notably higher over the two previous sessions.

Bond prices saw moderate weakness in morning trading before coming under additional pressure in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 10.7 basis points to 4.630 percent.

The sharp increase on the day came after the ten-year yield ended Thursday's trading at its lowest closing level in well over a month.

Treasuries showed a steep drop in afternoon trading after the Treasury Department revealed this month's auction of $24 billion worth of thirty-year bonds attracted below average demand.

The thirty-year bond auction drew a high yield of 4.769 percent and a bid-to-cover ratio of 2.24, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.38.

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 saw continued weakness as Federal Reserve Chair Jerome Powell addressed the outlook for U.S. monetary policy, saying the central bank "will not hesitate" to resume raising interest rates if it becomes appropriate.

Participating in a policy panel at the 24th Jacques Polak Annual Research Conference in Washington, D.C., Powell acknowledged that U.S. inflation has slowed over the past year but pointed out it remains well above the Fed's 2 percent target.

"My colleagues and I are gratified by this progress but expect that the process of getting inflation sustainably down to 2 percent has a long way to go," Powell said.

Powell also said the Fed is "not confident" a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time has been achieved.

"We know that ongoing progress toward our 2 percent goal is not assured: Inflation has given us a few head fakes," Powell said. "If it becomes appropriate to tighten policy further, we will not hesitate to do so."

He added, "We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening."

Powell indicated the Fed will make future monetary policy decisions "meeting by meeting" based on the totality of incoming data and the implications for the outlook for economic activity and inflation.

Trading on Friday may be impacted by reaction to a report on consumer sentiment in the month of November, which includes readings on consumers' inflation expectations.