Treasuries Close Notably Higher Following Solid 10-Year Note Auction

(RTTNews) - Treasuries showed a strong move to the upside over the course of the trading day on Wednesday, adding to the gains posted in the two previous sessions.

Bond prices moved moderately higher in morning trading and accelerated to the upside following a solid ten-year note auction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.1 basis points to 2.169 percent.

With the decrease on the day, the ten-year yield further offset the upward move seen last week, hitting its lowest closing level in almost two months.

Treasuries initially benefited from lingering concerns about the global economy, which also contributed to the strength seen earlier this week.

Recent developments in Greece have added to the concerns following yesterday's news that Greek Prime Minister Antonis Samaras called for an early election for a new President.

The news has led to worries that the outcome of the presidential election could trigger early parliamentary elections, resulting in the stridently anti-austerity Syriza party assuming power.

Further buying interest was generated by the release of the results of the Treasury Department's auction of $21 billion worth of ten-year notes, which attracted above average demand.

The ten-year note auction drew a high yield of 2.214 percent and a bid-to-cover ratio of 2.97, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.69.

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

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, the U.S. ten-year yield looks attractive [compared] to almost all of its peers."

"Combined with Fed driven short rates that are going up next year (Fed will be responding to the U.S. labor market) on top of global growth concerns, the flat yield curve trade will most likely continue," he added.

Finishing off this week's series of long-term securities auctions, the Treasury is due to sell $13 billion worth of thirty-year bonds on Thursday.

Trading on Thursday could also be impacted by the release of a slew of U.S. economic data, including closely watched reports on weekly jobless claims and retail sales.