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Treasuries Close Modestly Higher Following Choppy Trading Day

Treasuries showed a lack of direction over the course of the trading session on Monday but managed to end the day modestly higher.

Bond prices bounced back and forth across the unchanged line in morning trading before moving to the upside in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 2.328 percent.

The choppy trading on the day came as traders seemed reluctant to make significant moves ahead of congressional testimony from Federal Reserve Chair nominee Jerome Powell and current Fed Chair Janet Yellen.

The Senate Banking Committee is due to hold a confirmation hearing for Powell on Tuesday, while Yellen is scheduled to testify on the economic outlook before the Congressional Joint Economic Committee on Wednesday.

Economic data may also attract attention this week, as traders are likely to keep a close eye on reports on consumer confidence, pending home sales, personal income and spending, and manufacturing activity.

The Commerce Department released a report this morning showing new home sales unexpectedly jumped to a ten-year high in October.

The report showed new home sales surged up by 6.2 percent to an annual rate of 685,000 in October from the revised September rate of 645,000.

The notable increase surprised economists, who had expected new home sales to drop to a rate of 625,000 from the 667,000 originally reported for the previous month.

With the unexpected increase, new home sales reached their highest annual rate since hitting 727,000 in October of 2007.

In other news, the Treasury Department's auction of $26 billion worth of two-year notes on attracted below average demand.

The two-year note auction drew a high yield of 1.765 percent and a bid-to-cover ratio of 2.73, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.86.

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

Meanwhile, the Treasury Department's auction of $34 billion worth of five-year notes attracted average demand.

The five-year note auction drew a high yield of 2.066 percent and a bid-to-cover ratio of 2.46, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.45.

Powell's confirmation hearing is likely to attract attention on Tuesday along with reports on home prices and consumer confidence.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $28 billion worth of seven-year notes.

by RTTNews Staff Writer

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