Treasuries Turn Lower After Seeing Modest Strength

(RTTNews) - After seeing modest strength in morning trading, treasuries turned lower over the course of the trading session on Tuesday.

Bond prices pulled back in the afternoon before ending the day in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1 basis point to 2.338 percent.

The downturn by treasuries came as traders reacted to Federal Reserve Chair nominee Jerome Powell's testimony before the Senate Banking Committee.

Powell told the committee he favors "tailoring" banking regulations so the largest and most complex institutions face the most stringent regulations while the burden on smaller banks is reduced.

The Fed Chair nominee also said the case for a December interest rate hike is "coming together" and said the central bank will continue reducing its $4.5 trillion balance sheet in a process that will take three or four years.

Powell repeatedly refused to comment on the potential economic impact of the Republican tax reform legislation working its way through Congress.

Late in the trading day, the Senate Banking Committee voted 12 to 11 along party lines to send the GOP tax reform bill to the floor.

The full Senate could vote on the bill as early as Thursday, although the legislation still includes significant differences from the House version.

Meanwhile, the Treasury Department's auction of $28 billion worth of seven-year notes attracted below average demand.

The seven-year note auction drew a high yield of 2.230 percent and a bid-to-cover ratio of 2.36 percent, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.53.

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

On the economic front, the Conference Board released a report showing an unexpected improvement in consumer confidence in the month of November.

The Conference Board said its consumer confidence index climbed to 129.5 in November from an upwardly revised 126.2 in October. Economists had expected the index to drop to 124.5.

With the unexpected increase, the consumer confidence index rose to its highest level since reaching 132.6 in November of 2000.

Trading on Wednesday may be impacted by reaction to comments by Fed Chair Janet Yellen, who is due to testify on the economic outlook before the Congressional Joint Economic Committee.

Reports on third quarter GDP and pending home sales may also attract attention along with the Fed's Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.