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Treasuries Give Back Ground Following Recent Strength

After moving sharply higher over the past few sessions, treasuries gave back some ground during trading on Wednesday.

Bond prices moved to the downside in early trading and remained firmly negative for the rest of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4 basis points to 2.028 percent.

The moderate upward move by the ten-year yield came after it closed lower in each of the five previous session, ending Tuesday's trading at its lowest closing level in a month.

The pullback by treasuries came as stocks rebounded following the sell-off that was seen in the previous session, benefiting from a positive reaction to quarterly results from Alcoa (AA).

Treasuries saw continued weakness following the release of the Federal Reserve's Beige Book, a compilation of anecdotal evidence on economic conditions from each of the twelve Federal Reserve districts.

The Beige Book said the reports from the Fed districts indicated that the economy continued to expand at a modest to moderate pace from mid-February through late March.

In other economic news, the Labor Department released a report showing a 1.3 percent increase in import prices in the month of March. The price growth, which followed a 0.1 percent drop in February, exceeded analyst estimates for a 1.0 percent increase.

The report also showed that export prices rose by 0.8 percent in March following a 0.4 percent increase in February. Economists had expected export prices to increase by 0.3 percent.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auction of $21 billion worth of ten-year notes.

The ten-year note auction drew a high yield of 2.043 percent and a bid-to-cover ratio of 3.08, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 3.13.

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

Peter Boockvar, managing director at Miller Tabak, said, "Similar to yesterday's 3-year note auction, today's 10-year auction was just ordinary."

Economic data is likely to be in focus on Thursday, with traders likely to keep an eye on reports on weekly jobless claims, producer price inflation, and the U.S. trade deficit.

The Treasury also is due to sell $13 billion worth of thirty-year bonds on Thursday, finishing off this week's series of long-term securities auctions.

by RTTNews Staff Writer

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