Treasuries Close Modestly Higher But Well Off Best Levels

(RTTNews) - After seeing early strength, treasuries gave back some ground in reaction to the results of an auction of thirty-year bonds but still closed modestly higher.

Bond prices briefly dipped into the red in afternoon trading but moved to the upside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 2.096 percent.

With the modest drop, the ten-year yield closed lower for the fourth consecutive session, pulling back well off the two-month closing high set last Friday.

The early strength among treasuries was partly due to the release of a report from the Commerce Department showing that U.S. retail sales unexpectedly fell for the third straight month in February.

The report said retail sales slid by 0.6 percent in February following a 0.8 percent decrease in January. The drop surprised economists, who had expected sales to rise by 0.3 percent.

Excluding a steep drop in auto sales, retail sales still edged down by 0.1 percent in February compared to economist estimates for a 0.5 percent increase.

The disappointing data offset some of the recent concerns about the Federal Reserve raising interest rates sooner than anticipated.

However, treasuries pulled back rather sharply following the release of the results of the Treasury Department's auction of $13 billion worth of thirty-year bonds, which attracted below average demand.

The thirty-year bond auction drew a high yield of 2.681 percent and a bid-to-cover ratio of 2.18, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.45.

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

Following today's disappointing retail sales data, trading on Friday may be impacted by the release of reports on producer price inflation and consumer sentiment.

Nonetheless, trading activity may be somewhat subdued as traders look ahead to next week's Federal Reserve meeting.