Treasuries saw modest weakness during trading on Wednesday, extending yesterday's drop on the heels of a disappointing ten-year note auction.
Bond prices showed a lack of direction for much of the day, sliding a little more firmly into the red following the release of the auction results. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.2 basis points to 1.64 percent.
With the modest increase on the day, the ten-year yield added to the 7 basis point gain it posted on Tuesday to reach a new one-month closing high.
The modest weakness among treasuries came following the release of the results of the Treasury Department's auction of $24 billion worth of ten-year notes, which attracted below average demand.
The ten-year note auction drew a high yield of 1.68 percent and a bid-to-cover ratio of 2.49, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 3.13.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, Mario Draghi ended the U.S. Treasury rally dead in its tracks on July 26th when he temporarily calmed markets and that certainly carried over to today's auction."
"Looking out to the next few months, it will likely remain the Europeans driving U.S. bond yields either up or down much more so than any new incremental QE from the Fed," he added.
Finishing off this week's series of long-term securities auctions, the Treasury is due to sell $16 billion worth of thirty-year bonds on Thursday.
Trading on Thursday could also be impacted by the release of reports on the U.S. trade balance, weekly jobless claims, and wholesale inventories.
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