Treasuries Regain Ground As Ten-Year Note Auction Attracts Strong Demand

(RTTNews) - Treasuries showed a notable upward move during trading on Tuesday, rebounding following the sharp pullback seen over the two previous sessions.

Bond prices gave back ground after an early advance but moved back to the upside in afternoon trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.5 basis points to 4.404 percent.

The ten-year yield partly offset the surge seen over the two previous sessions but remained well off the two-month closing low set last Thursday.

Buying interest re-emerged in afternoon trading as the Treasury Department revealed this month's auction of $39 billion worth of ten-year notes attracted above average demand.

The ten-year note auction drew a high yield of 4.438 percent and a bid-to-cover ratio of 2.67, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.50.

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

Meanwhile, traders also continued to look ahead to two potentially major market moving economic events on Wednesday.

Early trading on Wednesday is likely to be driven by reaction to the Labor Department's closely watched report on consumer price inflation in the month of May.

Economists expect consumer prices to inch up by 0.1 percent in May after climbing by 0.3 percent in April, while core consumer prices, which exclude food and energy prices, are expected to increase by 0.3 percent for the second straight month.

The annual rate of growth by consumer prices is expected to come in unchanged at 3.4 percent, but the annual rate of core consumer price growth is expected to slow to 3.5 percent in May from 3.6 percent in April.

The data could have a significant impact on the outlook for interest rates ahead of the Federal Reserve's monetary policy announcement later in the day.

While the Fed is widely expected to leave interest rates unchanged, traders are likely to pay close attention to the accompanying statement as well as officials' latest projections for the economy and interest rates.