Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - After moving notably higher in response to yesterday's speech by Federal Reserve Chair Janet Yellen, treasuries gave back some ground during trading on Wednesday.

Bond prices came under pressure in morning trading but climbed well off their worst levels in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.6 basis points to 1.83 percent.

With the modest uptick on the day, the ten-year yield climbed off the one-month closing low set in the previous session.

The pullback by treasuries reflected profit taking as well as a report from payroll processor ADP showing slightly stronger than expected U.S. private sector job growth in the month of March.

ADP said private sector employment increased by 200,000 jobs in March after jumping by a downwardly revised 205,000 jobs in February. Economists had expected employment to climb by about 195,000 jobs.

Friday morning, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both private and public sector jobs.

Jay Morelock, an economist at FTN Financial, said, "After Chair Yellen dampened expectations of a Fed move in April, all eyes turn to Friday's employment report to gauge whether the Fed will lean toward June or push the next rate hike into the second half of the year."

Treasuries regained some ground in afternoon trading following the release of the results of the Treasury Department's auction of $28 billion worth of seven-year notes, which attracted average demand.

The seven-year note auction drew a high yield of 1.606 percent and a bid-to-cover ratio of 2.51, while the ten previous seven-year auctions had an average bid-to-cover ratio of 2.47.

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

Reports on weekly jobless claims and Chicago-area business activity may attract some attention on Thursday, although trading activity is likely to be somewhat subdued ahead of Friday's monthly jobs report.