Treasuries Give Back Ground Amid Rebound On Wall Street

(RTTNews) - After showing a lack of direction in morning trading on Wednesday, treasuries came under pressure over the course of the afternoon.

Bond prices bounced back and forth across the unchanged line before sliding firmly into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.8 basis points to 2.797 percent.

The notable increase as the day progressed came after the ten-year yield ended Monday's trading at its lowest closing level in over eight months.

A rebound on Wall Street contributed to the pullback by treasuries, as some traders moved to their money out of the safe haven of bonds and into riskier assets like stocks.

The strength that emerged on Wall Street was partly due to bargain hunting, with traders picking up stocks at reduced levels on the heels of recent weakness.

The continued sell-off seen in a holiday-shortened session on Monday dragged the major averages down to their lowest closing levels in well over a year.

Trading activity was somewhat subdued, however, as many traders remained away from their desks after the Christmas Day holiday on Tuesday.

Bond prices saw further downside following the release of the results of the Treasury Department's auction of $41 billion worth of five-year notes, which attracted below average demand.

The five-year note auction drew a high yield of 2.652 percent and a bid-to-cover ratio of 2.09, while the ten previous five-year note 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.

Looking ahead, the Treasury is due finish off this week's series of long-term securities auctions with the sale of $32 billion worth of seven-year notes on Thursday.

Trading on Thursday may also be impacted by reaction to a batch of economic data, including reports on weekly jobless claims, new home sales and consumer confidence.