Treasuries Move Notably Higher Despite Upbeat Economic Data

(RTTNews) - Treasuries moved notably higher over the course of the trading day on Tuesday, more than offsetting the weakness seen in the previous session.

Bond prices showed a steady move to the upside for much of the session before closing firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 7.8 basis points to 2.137 percent.

The strength among treasuries was partly due to continued concerns about the situation in Greece, as the country has to make a 300 million euro payment to the International Monetary Fund next week.

Greece's government on Monday ruled out imposing controls over capital flows over the upcoming weekend after an opposition lawmaker suggested the move if the country fails to strike a deal with its creditors.

Gabriel Sakellaridis, a spokesman for the Greek government, said that the speculation of imposing capital controls was "unfounded and malicious."

Treasuries may also have benefited from a sell-off on Wall Street, with the Dow plunging by more than 200 points on the day.

A batch of largely upbeat economic data contributed to the weakness among stocks amid concerns about the outlook for interest rates, but bond traders seemed to shrug off the data.

The Commerce Department released a report this morning showing a bigger than expected rebound in new home sales in the month of April.

The report said new home sales climbed 6.8 percent to an annual rate of 517,000 in April from the revised March rate of 484,000. Economists had expected new home sales to rise to a rate of 509,000.

A separate Commerce Department report showed a modest drop in durable goods orders in April, although the decrease largely reflected a pullback in the volatile transportation sector.

Orders excluding transportation rose by more than expected, and the report also showed a continued increase by a key reading on capital spending.

The Conference Board also released a report showing an unexpected uptick in consumer confidence in the month of May.

Meanwhile, the Treasury Department sold $26 billion worth of two-year notes on Tuesday, attracting average demand.

The two-year note auction drew a high yield of 0.648 percent and a bid-to-cover ratio of 3.40, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.42.

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 economic front, trading on Wednesday may be impact by the results of the Treasury's auction of $35 billion worth of five-year notes.