Treasuries Show Notable Move Back To The Upside

After moving sharply lower over the past few sessions, treasuries showed a strong move back to the upside during trading on Wednesday.

Bond prices moved modestly higher in early trading and climbed more firmly into positive territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.3 basis points to 2.840 percent.

The pullback by the ten-year yield came after it ended the previous session above 2.9 percent for the first time since December 2018.

The rebound by treasuries may partly have reflected bargain hunting following the recent downward trend, which came amid concerns about the Federal Reserve aggressively tightening monetary policy.

Treasuries saw further upside after the Treasury Department revealed this month’s auction of $16 billion worth of twenty-year bonds attracted strong demand.

The twenty-year bond auction drew a high yield of 3.095 percent and a bid-to-cover ratio of 2.80, while the ten previous twenty-year bond auctions had an average bid-to-cover ratio of 2.44.

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

Late in the trading day, the Federal Reserve released its Beige Book, which said U.S. economic activity has expanded at a moderate pace since mid-February.

The Fed noted consumer spending accelerated among retail and non-financial service firms, as Covid-19 cases tapered across the country.

Manufacturing activity was also described as “solid overall,” although the Fed said labor market tightness and elevated input costs continued to pose challenges on firms’ abilities to meet demand.

The elevated input costs came as inflationary pressures remained strong, with firms continuing to swiftly pass rising costs on to customers.

While firms were generally allowed to pass through higher input cost to customers due to strong demand, the Fed noted some districts saw negative sales impacts from rising prices.

Reports on weekly jobless claims and leading economic indicators may attract attention on Thursday along with remarks by Fed Chair Jerome Powell.

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