Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - After coming under pressure early in the session, treasuries regained some ground in afternoon trading on Tuesday but still closed in the end.

Bond prices ended the session modestly lower, well off their worst levels of the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.1 basis points to 1.859 percent.

The early sell-off by treasuries came as stocks moved sharply higher on the day due to bargain hunting following recent weakness.

Upbeat housing data also weighed on treasuries, with a Commerce Department report showing a sharp jump in new home sales in the month of April.

The Commerce Department said new home sales surged up by 16.6 percent to an annual rate of 619,000 in April from a revised 531,000 in March.

Economists had expected new home sales to climb by 2.3 percent to a rate of 523,000 from the 511,000 originally reported for the previous month.

With the much bigger than expected increase, new home sales reached their highest level since hitting 627,000 in January of 2008.

However, treasuries climbed well off their lows of the session following the release of the results of the Treasury Department's auction of $26 billion worth of two-year notes.

The two-year note auction drew a high yield of 0.920 percent and a bid-to-cover ratio of 3.00, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.98.

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 Wednesday, bond traders are likely to keep an eye on the results of the Treasury Department's auction of $34 billion worth of five-year notes.