Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - Treasuries finished Wednesday's trading modestly lower but ended the session well off their worst levels of the day.

After coming under pressure in early trading, bond prices regained some ground going into the close. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.9 basis points to 1.778 percent.

With the uptick on the day, the ten-year yield extended its recent upward move, reaching its highest closing level in over four months.

The modestly lower close by treasuries came as traders digested the minutes of the latest Federal Reserve meeting as well as the results of auctions of three-year and ten-year notes.

The minutes of last month's monetary policy meeting revealed that members of the Fed were divided regarding the timing of further interest rate hikes.

While three Fed officials voted to raise rates by a quarter point, several others said the eventual decision to leave rates unchanged was a "close call."

The Fed said a reasonable argument could be made either for an increase at the September meeting or for waiting for some additional information on the labor market and inflation.

Members generally agreed that the case for a rate hike had strengthened, but a majority determined that the Fed should wait for further evidence of progress toward its objectives.

The central bank is widely expected to leave rates unchanged at its November meeting due to the impending presidential election, but a rate hike in December remains on the table.

Traders were also reacting to the results of the Treasury Department's auctions of $24 billion worth of three-year notes and $20 billion worth of ten-year notes.

The three-year note auction drew a high yield of 1.045 percent and a bid-to-cover ratio of 2.92, while the ten-year note auction drew a high yield of 1.793 percent and a 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.

Looking ahead, the Treasury is due to finish of this week's series of long-term securities auctions with the sale of $12 billion worth of thirty-year bonds on Thursday.

Trading on Thursday could also be impacted by reports on weekly jobless claims and import and export prices, although traders may look ahead to more closely watched reports on producer prices and retail sales due on Friday.