After showing a lack of direction throughout much of the trading session on Wednesday, treasuries saw some strength following the release of the minutes of the latest Federal Reserve meeting.
Bond prices moved to the upside going into the close, ending the session moderately higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.5 basis points to 2.206 percent.
With the drop, the ten-year yield closed lower for the fourth straight session, falling to its lowest closing level in a month.
The late-day strength came following the release of the minutes of the Fed’s monetary policy meeting held last month.
The minutes revealed that Fed members saw economic conditions as continuing to approach those consistent with warranting an increase in interest rates.
However, several members also expressed uncertainty about whether Greece and its creditors would reach an agreement and about the pace of economic growth in China and other emerging market economies.
In light of the continued impasse in Greece in the weeks since the meeting as well as the recent sell-off in the Chinese stock market, traders seemed optimistic the Fed would hold off on raising rates.
Chris Low, chief economist at FTN Financial, said, “Should Greece suddenly be yanked from the fire with a last minute rescue or China manage to engineer a reinflation of its equity bubble, the Fed stands ready for liftoff.”
“But for now the bar for domestic data is a little higher than it was before, suggesting September liftoff is unlikely,” he added.
The higher close by treasuries also came as the Treasury Department’s auction of $21 billion worth of ten-year notes attracted slightly above average demand.
The ten-year note auction drew a high yield of 2.225 percent and a bid-to-cover ratio of 2.72, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.67.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
A report on weekly jobless claims may attract some attention on Thursday along with a thirty-year bond auction, although traders are also likely to keep an eye on developments overseas.
The material has been provided by InstaForex Company – www.instaforex.com