Treasuries Show Another Notable Move To The Downside

(RTTNews) - Treasuries moved notably lower over the course of the trading day on Wednesday, extending the downward move seen in the previous session.

Bond prices showed a steady move to the downside in morning trading and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 8.2 basis points to 4.624 percent.

The ten-year yield added to the 7.5 basis point jump seen on Tuesday, ending the session at its highest closing level in almost a month.

Treasuries came under pressure in the previous session as the Treasury Department reported disappointing results from this month's two-year and five-year note auctions.

The Treasury revealed this month's auctions of $69 billion worth of two-year notes and $70 billion worth of five-year notes both attracted well below average demand.

The negative sentiment continued to weigh on treasuries today, as the Treasury revealed this month's auction of $44 billion worth of seven-year notes also attracted below average demand.

The seven-year note auction drew a high yield of 4.650 percent and a bid-to-cover ratio of 2.43, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.55.

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

Concerns about the outlook for interest rates also continued to weigh on treasuries ahead of the release of inflation readings said to be preferred by the Federal Reserve on Friday.

The inflation data could have a significant impact on the outlook for rates ahead of the Fed's next monetary policy meeting on June 11-12.

Late in the trading day, the Fed released its Beige Book, which said U.S. economic activity continued to expand from early April to mid-May but noted conditions varied across industries and districts.

The report also said prices increased at a modest pace over the reporting period and are expected to continue to grow at a modest pace in the near term.

Reports on weekly jobless claims, first quarter GDP and pending home sales may attract attention on Thursday, although trading activity may be somewhat subdued ahead of the release of the closely watched inflation data on Friday.