24.03.2015 20:29:27

Treasuries Close Higher Following Solid Two-Year Note Auction

(RTTNews) - After showing a lack of direction early in the session, treasuries moved moderately higher over the course of the trading day on Tuesday.

Bond prices moved to the upside in afternoon trading to end the day firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to 1.878 percent.

With the drop on the day, the ten-year yield extended a recent downward trend, dropping to its lowest closing level in well over a month.

The strength that emerged among treasuries was partly in reaction to the results of the Treasury Department's auction of $26 billion worth of two-year notes, which attracted solid demand.

The two-year note auction drew a high yield of 0.598 percent and a bid-to-cover ratio of 3.46, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.42.

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

Earlier in the day, traders were presented with a Commerce Department report showing that new home sales unexpectedly jumped to a seven-year high in February.

The report said new home sales surged up by 7.8 percent to an annual rate of 539,000 in February from the revised January rate of 500,000.

The increase came as a surprise to economists, who had expected new home sales to drop to a rate of 462,000 from the 481,000 originally reported for the previous month.

With the unexpected increase, new home sales rose to their highest level since hitting a rate of 593,000 in February of 2008.

Meanwhile, the Labor Department released a separate report showing a modest rebound in consumer prices in February.

The Labor Department said its consumer price index edged up by 0.2 percent in February after tumbling by 0.7 percent in January. The modest increase by the index matched the consensus estimate.

Core consumer prices, which exclude food and energy prices, also rose by 0.2 percent for the second consecutive month. Economists had expected core prices to inch up by 0.1 percent.

Economic data may continue to attract attention on Wednesday, as the Commerce Department is due to release a report on durable goods orders.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $35 billion worth of five-year notes.

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