Treasuries Close Moderately Lower Ahead Of Fed Announcement

(RTTNews) - With traders showing caution ahead of tomorrow's monetary policy announcement, treasuries saw moderate weakness during trading on Tuesday.

Bond prices moved to the downside in early trading and remained stuck in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.7 basis points to 2.284 percent.

The weakness among treasuries came as traders looked ahead to the Federal Reserve's monetary policy announcement Wednesday afternoon.

As the Fed is widely expected to wrap up its asset purchase program, traders are likely to focus on any comments regarding the outlook for interest rates.

A disappointing two-year note auction also weighed on treasuries, as the Treasury Department's sale of $29 billion worth of two-year notes attracted below average demand.

The two-year note auction drew a high yield of 0.425 percent and a bid-to-cover ratio of 3.11, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.42.

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

On the economic front, the Conference Board released a report showing a notable improvement in consumer confidence in the month of October.

The Conference Board said its consumer confidence index climbed to 94.5 in October from an upwardly revised 89.0 in September. Economists had expected the index to edge up to 87.0 from the 86.0 originally reported for the previous month.

With the increase, the consumer confidence index more than offset the drop seen in the previous month to reach its highest level since October of 2007.

Meanwhile, the Conference Board released a separate report showing an unexpected drop in durable goods orders in the month of September.

The report said durable goods orders fell by 1.3 percent in September after plunging by 18.3 percent in August. The continued decrease came as a surprise to economists, who had expected orders to increase by about 0.5 percent.

The Fed announcement is likely to be in the spotlight on Wednesday, overshadowing an auction of $35 billion worth of five-year notes.