Following the rally seen in the previous session, treasuries saw some further upside over the course of the trading day on Tuesday.
Bond prices moved notably higher in early trading and managed to remain positive throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.7 basis points to 2.231 percent.
With the sharp drop seen over the past two days, the ten-year yield ended the session at its lowest closing level in a month.
The continued strength among treasuries came amid worries about the ongoing Greek debt crisis after the Greek people voted on Sunday to reject the austerity measures proposed by the country’s international creditors.
The “no” vote on the referendum has added to recent concerns about Greece leaving the eurozone, a move commonly known as the “Grexit.”
European finance ministers held an emergency meeting on Greece as part of a last-ditch effort to reach a new bailout agreement.
Jonathan Loynes, Chief European Economist at Capital Economics, said, “It is still just about possible to imagine some sort of agreement coming together which would keep Greece inside the currency union, in the short term at least.”
“It would presumably lie somewhere between the creditors’ last offer – rejected by the Greek public in last weekend’s referendum – and the latest counter-offer advanced on June 30th by [Prime Minister] Tsipras,” he added.
However, Loynes said it might very soon be time to accept the inevitable and refocus efforts on how best to manage the Grexit.
The Treasury Department also kicked off this week’s series of long-term securities auctions with the sale of $24 billion worth of three-year notes.
The three-year note auction drew a high yield of 0.932 percent and a bid-to-cover ratio of 3.16, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.29.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
News out of Greece may continue to attract attention on Wednesday, although traders are also likely to keep an eye on the minutes of the latest Federal Reserve meeting.
Bond trading could also be impacted by reaction to the Treasury Department’s auction of $21 billion worth of ten-year notes.
The material has been provided by InstaForex Company – www.instaforex.com