Treasuries Move Back To The Downside As Inflation Data Looms

(RTTNews) - Following the modest rebound seen in the previous session, treasuries moved back to the downside during trading on Tuesday.

Bond prices came under pressure early in the day and remained firmly negative throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.8 basis points to 1.954 percent.

The ten-year yield more than offset the modest drop seen on Monday, ending the session at its highest closing level in well over two years.

The pullback by treasuries came as traders continued to look ahead to the Labor Department's report on consumer price inflation in the month of January.

The report, which is due to be released Thursday morning, could impact the outlook for how aggressively the Federal Reserve will raise interest rates.

On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit widened modestly in the month of December.

The Commerce Department said the trade deficit widened to $80.7 billion in December from a revised $79.3 billion in November.

Economists had expected the trade deficit to expand to $83.0 billion from the $80.2 billion originally reported for the previous month.

The wider deficit came as the value of imports surged 1.6 percent to $308.9 billion, while the value of exports jumped 1.5 percent to $228.1 billion.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $50 billion worth of three-year notes, which attracted slightly above average demand.

The three-year note auction drew a high yield of 1.592 percent and a bid-to-cover ratio of 2.45, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.42.

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

Looking ahead, the Treasury is due to announce the results of this month's auctions of $37 billion worth of ten-year notes on Wednesday.