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Treasuries Once Again Turn Lower After Initial Move To The Upside

After an initial move to the upside, treasuries gave back ground over the course of the trading session on Thursday before closing moderately lower.

Bond prices fluctuated in afternoon trading but eventually ended the day in negative territory. As result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.9 basis points to 0.849 percent.

The ten-year yield closed higher for the third straight session, climbing further off the record closing low set on Monday.

Treasuries initially moved to the upside amid continued concerns about the impact of the coronavirus after President Donald Trump addressed the nation about the outbreak last night.

Trump was likely seeking to calm the markets but instead exacerbated concerns by announcing a ban on all travel from Europe to the U.S. for the next 30 days.

The president's remarks also created some confusion, as he initially said the prohibitions would apply to trade and cargo before subsequently tweeting that trade "will in no way be affected."

Trump also announced plans to address the economic impact of the outbreak, although some investors have complained about a lack of specifics.

Treasuries saw considerable volatility in afternoon trading as the Federal Reserve announced significant steps to provide liquidity to the financial markets.

The New York Fed said that it will offer banks more than $1 trillion worth of additional short-term cash loans as part of an effort to smooth operations in the Treasury and money markets.

"These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak," the New York Fed said in a statement.

In addition to pumping substantial amounts of money into the banking system, the Fed said it will extend its monthly purchases of $60 billion worth of Treasury securities across a range of maturities beyond just short-term T-bills.

The Fed has also scrapped plans to wind those purchases down in what some see as step toward a formal re-adoption of quantitative easing.

Meanwhile, the Treasury Department revealed that this month's auction of $16 billion worth of thirty-year bonds attracted modestly above average demand.

The thirty-year bond auction drew a high yield of 1.320 percent and a bid-to-cover ratio of 2.36, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.30.

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

Earlier this week, the Treasury revealed its auctions of $38 billion worth of three-year notes and $24 billion worth of ten-year notes attracted below average demand.

Reports on import and export prices and consumer sentiment are due to be released on Friday but are likely to be overshadowed by the latest developments regarding the coronavirus.

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