Treasuries Close Modestly Higher After Seeing Early Weakness

(RTTNews) - After moving modestly lower in early trading on Tuesday, treasuries turned higher over the course of the trading session.

Bond prices climbed well off their early lows in morning trading before moving to the upside in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.8 basis points to 2.518 percent.

The early weakness among treasuries was partly due to the release of a report from the Commerce Department showing an unexpected increase in durable goods orders in the month of April.

The Commerce Department said durable goods orders increased by 0.8 percent in April after surging up by an upwardly revised 3.6 percent in March. The continued growth surprised economists, who had expected orders to drop by 0.7 percent.

Excluding an increase in orders for transportation equipment, durable goods orders edged up by a more modest 0.1 percent in April.

Additionally, the Conference Board released a separate showing that consumer confidence improved in line with economist estimates in the month of May.

The Conference Board said its consumer confidence index climbed to 83.0 in May from a downwardly revised 81.7 in April.

However, selling pressure waned as the morning progressed, and treasuries subsequently climbed back near the unchanged line.

Buying interest intensified following the release of the results of the Treasury Department's auction of $31 billion worth of two-year notes, which attracted above average demand.

The two-year note auction drew a high yield of 0.392 percent and a bid-to-cover ratio of 3.52, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.35.

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

Amid a quiet day on the U.S. economic front, trading on Wednesday may be impacted by the results of the Treasury's auction of $35 billion worth of five-year notes.