Treasuries Edge Modestly Higher, Ten-Year Yield Closes Below 0.6%

After ending the previous session modestly higher, treasuries saw some further upside during the trading day on Wednesday.

Bond prices gave back some ground after an early upward move but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 0.595 percent.

With the modest decrease on the day, the ten-year yield closed below 0.6 percent for the first time in three months.

The early strength among treasuries came as traders looked to the safe haven of bonds amid rising U.S.-China tensions after the U.S. asked Beijing to close its diplomatic consulate in Houston within the next 72 hours.

Chinese foreign ministry spokesperson Wang Wenbin condemned the action and warned of retaliation if the U.S. does not reverse its decision.

Treasuries also benefited from lingering coronavirus concerns, as President Donald Trump warned on Tuesday that the pandemic "will probably, unfortunately, get worse before it gets better."

With new cases spiking, the U.S. government placed an initial order for 100 million doses of the COVID-19 vaccine candidate jointly developed by Pfizer (PFE) and BioNTech (BNTX) for $1.95 billion and can acquire up to 500 million additional doses.

On the U.S. economic front, the National Association of Realtors released a report showing existing home sales rebounded at a record pace in June after three straight months of declines.

NAR said existing home sales spiked by 20.7 percent to an annual rate of 4.72 million in June after plunging by 9.7 percent to a rate of 3.91 million in May. Economists had expected sales to skyrocket by about 24.5 percent.

"The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown," said Lawrence Yun, NAR's chief economist.

Meanwhile, the Treasury Department announced the results of this month's auction of $17 billion worth of twenty-year bonds on Wednesday.

The twenty-year bond auction drew a high yield of 1.059 percent and a bid-to-cover ratio of 2.43. Last month, the Treasury also sold $17 billion worth of twenty-year bonds, drawing a high yield of 1.314 percent and a bid-to-cover ratio of 2.63.

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

Reaction to the weekly jobless claims report may drive trading on Thursday, with recent data showing the pace of decline in jobless claims has slowed considerably.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT