Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - Treasuries moved modestly lower during trading on Wednesday but ended the session well off their worst levels of the day.

Bond prices initially showed a lack of direction but eventually slid into negative territory before recovering going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.4 basis points to 2.65 percent.

The modest pullback by treasuries was partly in reaction to the results of the Treasury Department's auction of $21 billion worth of ten-year notes, which attracted below average demand.

The ten-year note auction drew a high yield of 2.657 percent and a bid-to-cover ratio of 2.58, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.76.

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

However, treasuries regained some ground following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes did not provide much new information but confirmed that concerns about a government shutdown kept the Federal Reserve from scaling back its monetary stimulus last month

Wall Street expected the Fed to taper its $85 billion per month bond-buying plan, but in a "close call" most policy makers chose to leave the program in place.

After a heated debate, "All members but one judged that it would be appropriate for the Committee to await more evidence that progress would be sustained before adjusting the pace of asset purchases," the minutes said.

Meanwhile, bond traders largely shrugged off news that President Barack Obama planned to nominate Janet Yellen to replace Ben Bernanke as Chairman of the Federal Reserve.

Yellen, who currently serves as Vice Chair of the Fed, was widely seen as the frontrunner for the nomination after former White House economic advisor Larry Summers withdrew from consideration for the post last month.

Yellen is seen as having a similar outlook on monetary policy as Bernanke, who championed the Fed's controversial $85 billion per month bond-buying program.

Trading on Thursday may be impacted by the Labor Department's weekly jobless claims report, which is among the few economic reports being released during the government shutdown.

Additionally, the Treasury is due to sell $13 billion worth of thirty-year bonds, finishing off this week's series of long-term securities auctions.