Treasuries Close Roughly Flat For Second Straight Day

Treasuries showed a strong move to the upside in early trading on Wednesday but gave back ground over the course of the session.

Bond prices pulled back well off their early highs and briefly dipped into negative territory before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by less than a basis point to 3.976 percent.

The pullback by treasuries partly reflected a negative reaction to the results of the Treasury Department’s auction of $32 billion worth of ten-year notes, which attracted below average demand.

The ten-year note auction drew a high yield of 3.985 percent and a bid-to-cover ratio of 2.35, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.42.

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

Traders also continued to express concerns about the outlook for interest rates as Federal Reserve Chair Jerome Powell spent his second day testifying on Capitol Hill.

Powell reiterated his prepared remarks from yesterday, telling lawmakers the “ultimate level of interest rates is likely to be higher than previously anticipated.”

He also said the Fed would be prepared to reaccelerate the pace of rate hikes if the totality of incoming data were to indicate that faster tightening is warranted.

Traders may also have been reluctant to make significant moves ahead of the release of the closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 203,000 jobs in February after surging by 517,000 jobs in January, while the unemployment rate is expected to hold at 3.4 percent.

The jobs data could have a significant impact on the outlook for interest rates, as the Fed has warned about labor market tightness.

Looking ahead, a report on weekly jobless claims may attract attention on Thursday, although trading activity may remain subdued ahead of Friday’s monthly jobs report.

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