Treasuries Close Roughly Flat After Seeing Early Strength

(RTTNews) - After seeing strength in morning trading on Wednesday, treasuries gave back ground over the course of the session before closing only slightly higher.

Bond prices pulled back well off their highs to end the session near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.13 percent after hitting a low of 2.082 percent.

The ten-year yield still ended the day at a two-month closing low but was well off the three-month intraday low set earlier in the session.

The early strength among treasuries was partly due to news the Chinese central bank once again moved to devalue its currency.

The People's Bank of China set the daily reference rate at 6.3306 yuan per dollar, down 1.6 percent from the rate set on Tuesday. Combined with the drop seen on Monday, the currency was reduced by the most in over twenty years.

The move to devalue the yuan for the second straight day added to concerns about the Chinese economy as well as the possibility that it could start a currency war.

However, traders seemed somewhat reluctant to continue buying treasuries, which subsequently pulled back following a disappointing ten-year note auction.

The Treasury Department sold $24 billion worth of ten-year notes, drawing a high yield of 2.115 percent and a bid-to-cover ratio of 2.40. The ten previous ten-year note auctions had an average bid-to-cover ratio of 2.67.

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

Finishing off this week's series of long-term securities auctions, the Treasury is due to sell $16 billion worth of thirty-year bonds on Thursday.

Trading on Thursday could also be impacted by several economic reports, including data on retail sales, import and export prices, and weekly jobless claims.