Treasuries Close Moderately Lower Following Yellen's Testimony

(RTTNews) - After ending the previous session nearly unchanged, treasuries moved moderately lower during trading on Tuesday.

Bond prices moved to the downside in early trading and remained stuck in the red throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 2.719 percent.

The weakness among treasuries came as traders digested new Federal Reserve Chair Janet Yellen's testimony before the House Financial Services Committee.

In prepared remarks, Yellen indicated that she expects a great deal of continuity in the Fed's approach to monetary policy.

She predicted that the Fed would continue to reduce the pace of asset purchases in measured steps at future meetings but noted that purchases are not on a preset course.

Yellen also reiterated that a highly accommodative policy will remain appropriate for a considerable time after the asset purchases end.

The new Fed chief mentioned the recent volatility in global financial markets but expressed her belief that the developments do not currently pose a substantial risk to the U.S. economic outlook.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Bottom line, 'continuity' is what she said in her statement and that seems to be exactly what we got as her testimony was very similar to the last FOMC statement."

In the question-and-answer portion of her testimony, Yellen said it would take a notable change in the economic outlook for the Fed to consider pausing its asset purchase tapering.

Meanwhile, traders largely shrugged off the release of the results of the Treasury Department's auction of $30 billion worth of three-year notes.

The three-year note auction drew a high yield of 0.715 percent and a bid-to-cover ratio of 3.42, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.27.

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 U.S. economic front, trading on Wednesday could be impacted by the results of the Treasury's auction of $24 billion worth of ten-year notes.