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Treasuries Move Back To The Upside

After moving notably lower in the previous session, treasuries move back to the upside during trading on Wednesday.

Bond prices moved higher early in the session and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.6 basis points to 1.334 percent.

The advance by treasuries partly reflected concerns the rapid spread of the delta variant of the coronavirus may slow the global economic recovery.

Treasuries also benefited from a positive reaction to the release of the results of the Treasury Department's auction of $38 billion worth of ten-year notes, which attracted above average demand

The ten-year note auction drew a high yield of 1.338 percent and a bid-to-cover ratio of 2.59, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.43.

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

Treasuries saw continued strength after the Federal Reserve's Beige Book said U.S. economic growth downshifted slightly to a moderate pace in early July through August.

The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, said the deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most districts.

The deceleration in those sectors reflected safety concerns due to the rise of the Delta variant of the coronavirus, and, in a few cases, international travel restrictions.

Meanwhile, the Fed said other sectors of the economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages, as opposed to softening demand.

"In particular, weakness in auto sales was widely ascribed to low inventories amidst the ongoing microchip shortage, and restrained home sales activity was attributed to low supply," the Fed said.

The Beige Book also said inflation was reported to be steady at an elevated pace, as half of the districts characterized the pace of price increases as strong, while half described it as moderate.

Looking ahead, trading on Thursday may be impacted by reaction to the weekly jobless claims reports along with comments by several Federal Reserve officials.

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