Treasuries Close Modestly Lower Following Late-Day Pullback

(RTTNews) - After showing a lack of direction throughout much of the trading session on Wednesday, treasuries came under pressure late in the day to close modestly lower.

Bond prices moved to the downside going into the close to halt a recent winning streak. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.1 basis points to 1.567 percent.

The late-day pullback by treasuries came as the price of oil spiked higher in reaction to a report from Reuters indicating that OPEC members have reached an agreement to cut oil output.

Citing two OPEC sources, Reuters said the group has agreed to reduce oil output to 32.5 million barrels per day from current production levels of about 33.24 million barrels per day.

How much each country will produce will be determined at the next formal meeting of OPEC in November, Reuters said.

The price of crude oil jumped in response to the report, with crude for November delivery surging up $2.38 to $47.05 a barrel.

Earlier in the day, treasuries lingered near the unchanged line as traders digested remarks by Federal Reserve Chair Janet Yellen.

In testimony before the House Financial Services Committee, Yellen told lawmakers there is no "fixed timetable" for raising interest rates but noted that a majority of the members of the Federal Open Market Committee think a rate hike is likely this year.

Yellen also cautioned that continued job creation at the current pace could cause the economy to overheat, forcing the Fed to raise rates faster than currently anticipated.

Meanwhile, the bond markets did not show much reaction to the results of the Treasury Department's auction of $28 billion worth of seven-year notes, which attracted average demand.

The seven-year note auction drew a high yield of 1.389 percent and a bid-to-cover ratio of 2.47, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.49.

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

On the U.S. economic front, the Commerce Department released a report this morning showing that durable goods orders came in flat in the month of August.

The Commerce Department said durable goods orders were virtually unchanged in August after jumping by a revised 3.6 percent in July.

Economists had expected orders to pull back by about 1.4 percent compared to the 4.4 percent spike that had been reported for the previous month.

Excluding orders for transportation equipment, durable goods orders fell by 0.4 percent in August after surging up by 1.1 percent in July. The drop matched economist estimates.

Trading on Thursday may be impacted by reaction to some key economic data, including reports on second quarter GDP, weekly jobless claims, and pending home sales. Remarks by several Fed officials may also attract attention.