Plus   Neg

Treasuries Move To The Upside Ahead Of Fed Announcement

After ending the previous session modestly higher, treasuries saw some further upside over the course of the trading day on Tuesday.

Bond prices moved steadily higher as the day progressed before closing firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.6 basis points to 2.708 percent.

The continued strength among treasuries came as traders expressed uncertainty about trade talks between the U.S. and China after the Justice Department unsealed sweeping criminal charges against Chinese tech giant Huawei and its chief financial officer Meng Wanzhou.

Treasuries also benefited from the release of a report from the Conference Board showing a substantial deterioration in consumer confidence in the month of January.

The Conference Board said its consumer confidence index slumped to 120.2 in January after tumbling to a revised 126.6 in December.

Economists had expected the consumer confidence index to fall to 124.3 from the 128.1 originally reported for the previous month.

Lynn Franco, Senior Director of Economic Indicators at the Conference Board, noted expectations saw a significant drop due to financial market volatility and the government shutdown.

"Shock events such as government shutdowns (i.e. 2013) tend to have sharp, but temporary, impacts on consumer confidence," Franco said.

She added, "Thus, it appears that this month's decline is more the result of a temporary shock than a precursor to a significant slowdown in the coming months."

Meanwhile, the Treasury Department sold $32 billion worth of seven-year notes, attracting average demand.

The seven-year note auction drew a high yield of 2.625 percent and a bid-to-cover ratio of 2.54, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.53.

Today's seven-year note auction came after the Treasury sold $40 billion worth of two-year notes and $41 billion worth of five-year notes on Monday.

The Federal Reserve's monetary policy announcement is likely to be in focus on Wednesday, although the central bank is widely expected to leave interest rates unchanged after last month's rate hike.

A report on private sector employment may also attract attention ahead of the release of the Labor Department's more closely watched monthly jobs report on Friday.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT