On the heels of the sharp pullback seen in the previous session, treasuries showed a strong move back to the upside during trading on Tuesday.
Bond prices moved steadily higher for much of the session before moving roughly sideways going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 8.9 basis points to 2.125 percent.
The strong rebound by treasuries came as traders looked for safe havens amid another sell-off by stocks on Wall Street.
Ongoing uncertainty about the outlook for U.S. monetary policy contributed to the weakness among stocks.
Following last week’s Federal Reserve decision to leave interest rates unchanged, traders are questioning when the central bank will eventually raise rates.
Some analysts believe the Fed will hike rates at a meeting next month, while others expect the rate increase to be delayed until December.
Weakness in the European markets also weighed on U.S. stocks, with the major averages in the region all pulling back sharply.
Concerns that auto giant Volkswagen could face a massive fine for cheating on emissions tests are contributing the sell-off by European stocks.
Meanwhile, bond traders largely shrugged off the results of the Treasury Department’s auction of $26 billion worth of two-year notes, which attracted below average demand.
The two-year note auction drew a high yield of 0.699 percent and a bid-to-cover ratio of 3.27, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.41.
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 reports on weekly jobless claims, durable goods orders, and new home sales.
The material has been provided by InstaForex Company – www.instaforex.com