Treasuries Close Modestly Higher On Strong Demand For Ten-Year Note Auction

After trending lower over the past few sessions, treasuries showed a modest move back to the upside during trading on Wednesday.

Bond prices came under pressure in morning trading but rebounded over the course of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.1 basis points to 3.653 percent.

The turnaround by treasuries came as the Treasury Department revealed this month's auction of $35 billion worth of ten-year notes attracted above average demand.

The ten-year note auction drew a high yield of 3.613 percent and a bid-to-cover ratio of 2.66, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.40.

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 moved lower earlier in the session following remarks by New York Fed President John Williams, who said interest rates may need to be kept at an elevated level for a "few years" to bring down inflation.

"To me, the important thing is we need a sufficiently restrictive stance, we need to retain a sufficiently restrictive stance of policy, we're going to need to maintain that for a few years to make sure we get inflation to 2 percent, then eventually we'll get interest rates presumably back to more normal levels," Williams said at The Wall Street Journal's CFO Network Summit in New York.

Trading on Thursday may be impacted by reaction to the Labor Department's report on weekly jobless claims as well as the results of the Treasury's auction of $21 billion worth of thirty-year bonds.

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