Treasuries Regain Ground Following Two-Day Sell-Off

(RTTNews) - Treasuries showed a strong move back to the upside during trading on Tuesday, regaining ground following the sell-off seen over the two previous sessions.

Bond prices showed a significant advance in morning trading and remained firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.4 basis points to 4.090 percent.

The rebound by treasuries may have reflected bargain hunting after the nosedive seen last Friday and Monday drove the ten-year yield up by more than 30 basis points.

Nonetheless, the ten-year yield remains well off the one-month closing low set last Thursday amid fading optimism the Federal Reserve will lower interest rates in March.

Fed Chair Jerome Powell has said the central bank is unlikely to cut rates in March and the chances of a rate cut next month have fallen to just 17.5 percent, according to CME Group's FedWatch Tool

Treasuries remained firmly positive even as the Treasury Department revealed this month's auction of $54 billion worth of three-year notes attracted below average demand.

The three-year note auction drew a high yield of 4.169 percent and a bid-to-cover ratio of 2.58, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.71.

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 $42 billion worth of ten-year notes.

A report on the U.S. trade deficit may also attract some attention along with speeches by several Federal Reserve officials.