Treasuries See Further Downside Following Yesterday's Sharp Pullback

(RTTNews) - After pulling back sharply in the previous session, treasuries saw some further downside during trading on Wednesday.

Bond prices showed a lack of direction in morning trading before turning firmly negative in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.9 basis points to 2.172 percent.

With the increase on the day, the ten-year yield climbed further off the nearly four-month closing low set on Monday.

The continued weakness among treasuries was partly in reaction to the results of the Treasury Department's auction of $35 billion worth of five-year notes, which attracted below average demand.

The five-year note auction drew a high yield of 1.463 percent and a bid-to-cover ratio of 2.34, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.50.

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

Selling pressure was also generated by a report from the Commerce Department showing that durable goods orders unexpectedly increased in July.

The report said durable goods orders climbed by 2.0 percent in July after jumping by an upwardly revised 4.1 percent in June. The continued increase surprised economists, who had expected orders to drop by 0.4 percent.

Excluding a sharp increase in orders for transportation equipment, durable goods orders rose by a more modest 0.6 percent in July following a 1.0 percent increase in June.

Economic data may also attract attention on Thursday, with traders likely to keep an eye on reports on second quarter GDP, weekly jobless claims, and pending home sales.

The Treasury is also due to finish off this week's series of long-term securities auctions with the sale of $29 billion worth of seven-year notes.