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Treasuries Show Modest Move Back To The Downside

Following the rebound seen in the previous session, treasuries moved back to the downside during the trading day on Wednesday.

Bond prices regained some ground after coming under pressure early in the session but remained in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.7 basis points to 3.225 percent.

The early weakness among treasuries came following the release of a report from the Labor Department showing producer prices rose in line with economist estimates in the month of September.

The Labor Department said its producer price index for final demand increased by 0.2 percent in September after edging down by 0.1 percent in August. Economists had expected prices to rise by 0.2 percent.

Excluding decreases in prices for food and energy, core producer prices still rose by 0.2 percent in September after slipping by 0.1 percent in August. The uptick in core prices also matched economist estimates.

The report also said the annual rate of producer price growth slowed to 2.6 percent in September from 2.8 percent in August, while the annual rate of core producer price growth accelerated to 2.5 percent from 2.3 percent.

Meanwhile, traders largely shrugged off the results of the Treasury Department's auctions of $36 billion worth of three-year notes and $23 billion worth of ten-year notes, which both attracted below average demand.

The three-year note auction drew a high yield of 2.989 percent and a bid-to-cover ratio of 2.56, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.85.

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 ten-year note auction drew a high yield of 3.225 percent and a bid-to-cover ratio of 2.39 compared to the average bid-to-cover ratio of 2.62 in the ten previous ten-year note auctions.

On Thursday, the Treasury is due to finish off this week's long-term securities auctions with the sale of $15 billion worth of thirty-year bonds.

Trading on Thursday may also be impacted by reaction to the Labor Department's reports on consumer price inflation and weekly jobless claims.

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