After seeing initial weakness, treasuries turned higher over the course of the trading session on Tuesday, extending a recent upward trend.
Bond prices climbed well off their early lows to the end the session firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.6 basis points to 2.102 percent.
With the downturn on the day, the ten-year yield more than offset yesterday’s increase to end the session at a new two-month closing low.
The turnaround by treasuries was partly due to a notable downturn by the price of crude oil, which once again came under pressure on the day.
After reaching a high of $32.21 a barrel, crude for February delivery fell $0.97 to a new twelve-year closing low of $30.44 a barrel.
Treasuries saw continued strength even after the release of the results of the Treasury Department’s auction of $24 billion worth of three-year notes, which attracted below average demand.
The three-year note auction drew a high yield of 1.174 percent and a bid-to-cover ratio of 2.94, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.21.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Trading on Wednesday may be impacted by reaction to the results of the Treasury Department’s auction of $21 billion worth of ten-year notes.
The Federal Reserve is also scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.
The material has been provided by InstaForex Company – www.instaforex.com