Treasuries Extend Recovery From Last Week's Pullback

(RTTNews) - Treasuries moved notably higher during trading on Tuesday, extending the upward move that was seen in the previous session.

Bond prices moved to the upside in early trading and remained firmly positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.2 basis points to 2.565 percent.

With the drop, the ten-year yield further offset the notable advance seen last week, although it remains well above its recent lows.

Treasuries seemed to benefit from continued weakness on Wall Street, as stocks pulled back further off last week's highs amid anxiety about the looming earnings season.

The Dow was down nearly 150 points at its worst levels of the day, adding to the modest loss posted in the previous session.

Meanwhile, treasuries remained firmly positive following the release of the results of the Treasury Department's auction of $27 billion worth of three-year notes.

The three-year note auction drew a high yield of 0.992 percent and a bid-to-cover ratio of 3.38, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.34.

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

Traders largely shrugged off mixed remark by Richmond Federal Reserve President Jeffrey Lacker and Minneapolis Fed President Narayana Kocherlakota.

Lacker, a policy hawk, said inflation has bottomed out and is moving toward the Fed's target and predicted moderate economic growth.

On the other hand, the more dovish Kocherlakota said he does not expect the drop in the unemployment rate to be sustained and called the firmer inflation "temporary."

While trading activity may be somewhat subdued early on Wednesday, the results of the Treasury's auction of $21 billion worth of ten-year notes and the minutes of the latest Fed meeting are likely to be in focus later in the session.