Treasuries Close Modestly Lower After Disappointing Three-Year Note Auction

(RTTNews) - After ending the previous session nearly flat, treasuries moved modestly lower over the course of the trading day on Tuesday.

Bond prices drifted lower in morning trading before moving roughly sideways in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.2 basis points to 2.442 percent.

The weakness among treasuries was partly due to profit taking following the recent strength in the bond market, which pushed the ten-year yield down to a one-year closing low last Friday.

Results of the Treasury Department's auction of $27 billion worth of three-year notes also weighed on treasuries, as the auction attracted well below average demand.

The three-year note auction drew a high yield of 0.924 percent and a bid-to-cover ratio of 3.03, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.35.

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

Nonetheless, trading activity remained somewhat subdued amid another quiet day on the U.S. economic front, with traders looking ahead to the release of some key data in the coming days.

The Commerce Department is scheduled to release its closely watched retail sales report on Wednesday, while reports on weekly jobless claims, producer prices and industrial production may attract attention later in the week.

Along with the retail sales report, trading on Wednesday could also be impacted by the results of the Treasury's auction of $24 billion worth of ten-year notes.