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Treasuries Show Substantial Move To The Downside

Treasuries saw substantial weakness during trading on Wednesday, extending the notable downward move seen over the course of the previous session.

After moving to the downside in early trading, bond prices moved steadily lower throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged up by 16.7 basis points to 2.274 percent.

With the upward move, the ten-year yield added to the 7.6 basis point gain posted on Tuesday, ending the session at a four-month closing high.

The weakness among treasuries came as traders continued to digest yesterday's remarks from the Federal Reserve, with the central bank noting that information received since its January meeting suggests that the economy has been expanding moderately.

The Fed also said it expects moderate economic growth over the coming quarters and consequently anticipates that the unemployment rate will decline gradually.

While the central bank also reiterated that economic conditions are likely to warrant exceptionally low rates at least through late 2014, policymakers gave no hint they would embark on another round of quantitative easing.

Treasuries saw continued weakness following the release of the results of the Treasury Department's auction of $13 billion worth of thirty-year bonds.

The thirty-year bond auction drew a high yield of 3.383 percent and a bid-to-cover ratio of 2.70, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.63.

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

Economic data is likely to be in focus on Thursday, with traders likely to keep an eye on reports on jobless claims, producer prices, and manufacturing activity in the New York and Philadelphia areas.

by RTT Staff Writer

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