Treasuries Close Roughly Flat After Seeing Early Weakness

(RTTNews) - After moving modestly lower in early trading on Tuesday, treasuries recovered over the course of the session to end the day roughly flat.

Bond prices climbed well off their early lows but were unable to sustain the upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day up by less than a basis point at 2.642 percent.

The early weakness among treasuries was partly due to the release of a report from the Commerce Department showing that the U.S. trade deficit narrowed by much more than expected in June.

The report said the trade deficit narrowed to $34.2 billion in June from a revised $44.1 billion in May, while economists had expected the deficit to narrow to $43.0 billion.

Paul Ashworth, Chief U.S. Economist at Capital Economics said the narrower than expected trade deficit suggests that second quarter GDP growth was significantly stronger than the preliminary estimate of 1.7 percent.

While the data raised some concerns about the outlook for the Federal Reserve's asset purchase program, selling pressure remained subdued.

Treasuries subsequently moved back to the upside following the release of the results of the Treasury Department's auction of $32 billion worth of three-year notes.

The three-year auction drew a high yield of 0.631 percent and a bid-to-cover ratio of 3.21, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.44.

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

Amid a relatively quiet day on the U.S. economic front, trading on Wednesday could be impacted by the release of the results of the Treasury's auction of $24 billion worth of ten-year notes.