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Treasuries Pull Back Off Best Levels But Still Close Higher

Treasuries showed a notable move to the upside during the trading day on Wednesday, extending the strong advance seen over the past few sessions.

Bond prices pulled back off their best levels in afternoon trading but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 2.236 percent.

The ten-year yield extended the steep drop seen over the past several days, ending the session at its lowest closing level since September of 2017.

Worries about a further escalation of the U.S.-China trade dispute contributed to the continued strength among treasuries amid concerns China may seek to weaponize its dominance in rare earth minerals.

Reports suggest China is considering restricting the export of rare earth minerals, which are crucial for the U.S. technology industry.

The latest developments on the trade front have added fuel to investor fears that the dispute between the U.S. and China could escalate into a full-fledged trade war.

However, treasuries gave back some ground following the release of the results of the Treasury Department's auction of $32 billion worth of seven-year notes, which attracted below average demand.

The seven-year note auction drew a high yield of 2.144 percent and a bid-to-cover ratio of 2.30, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.52.

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

Following a few quiet days on the U.S. economic front, trading on Thursday may be impacted by reaction to reports on weekly jobless claims and pending home sales as well as a revised reading on first quarter GDP.

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