Treasuries Regain Ground Following Recent Weakness

(RTTNews) - Treasuries showed a strong move to the upside during trading on Wednesday, regaining ground after moving sharply lower over the two previous sessions.

Bond prices gave back ground after an early advance but climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.4 basis points to 4.585 percent.

The rebound by treasuries may partly have reflected bargain hunting, with the pullback by the ten-year yield coming after it reached a new five-month closing high on Tuesday.

Concerns about the outlook for interest rates have recently weighed on treasuries, as remarks by Federal Reserve Chair Jerome Powell combined with data showing sticky inflation and continued economic strength have led to reduced expectations of a rate cut in June.

According to CME Group's FedWatch Tool, the chances of a 25 basis point rate cut in June have tumbled to 16.4 percent compared to 55.2 percent just a week ago.

Treasuries saw continued strength 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 4.818 percent and a bid-to-cover ratio of 2.82, while the ten previous twenty-year bond auctions had an average bid-to-cover ratio of 2.63.

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

Trading on Thursday may be impacted by reaction to the latest U.S. economic data, including reports on weekly jobless claims, existing home sales and Philadelphia-area manufacturing activity.