Treasuries Show Strong Move Back To The Upside

Following the sharp pullback seen in the previous session, treasuries showed a strong move back to the upside during trading on Tuesday.

Bond prices moved higher at the start of 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 9.1 basis points to 4.571 percent.

The ten-year yield largely offset the 10.4 basis point jump seen on Monday but remains above the one-month closing low set last Friday.

The rebound by treasuries came as traders remain optimistic about the outlook for interest rates ahead of speeches by Federal Reserve Chair Jerome Powell on Wednesday and Thursday.

Powell is due to deliver opening remarks at the Division of Research and Statistics Centennial Conference on Wednesday and participate in a policy panel discussion before the 24th Jacques Polak Annual Research Conference on Thursday.

Traders are likely to pay close attention to Powell’s remarks, looking for additional confirmation the Fed will leave interest rates unchanged for the foreseeable future.

Treasuries saw further upside after the Treasury Department announced the results of this month’s auction of $48 billion worth of three-year notes even though the sale attracted modestly below average demand.

The three-year note auction drew a high yield of 4.701 percent and a bid-to-cover ratio of 2.67, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.72.

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

In U.S. economic news, a report released by the Commerce Department showed the U.S. trade deficit widened by more than expected in the month of September.

The Commerce Department said the trade deficit increased to $61.5 billion in September from a revised $58.7 billion in August.

Economists had expected the trade deficit to climb to $60.2 billion from the $58.3 billion originally reported for the previous month.

The wider than expected deficit came as the value of imports surged by 2.7 percent to $322.7 billion, while the value of exports jumped by 2.2 percent to $261.1 billion.

Powell’s speech is likely to be in focus on Wednesday, while results of the Treasury Department’s ten-year note auction may also attract attention.

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