Treasuries Close Volatile Trading Day Modestly Higher

(RTTNews) - Treasuries saw considerable volatility over the course of the trading day on Thursday before ending the session modestly higher.

After seeing initial strength, bond prices pulled back into the red before rebounding late in the trading day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.3 basis points to 2.40 percent.

With the drop on the day, the ten-year yield added to the loss posted in the previous session, falling to a new one-year closing low.

The late-day strength among treasuries largely reflected a positive reaction to the Treasury Department's auction of $16 billion worth of thirty-year bonds, which attracted strong demand.

The thirty-year bond auction drew a high yield of 3.224 percent and a bid-to-cover ratio of 2.60, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.40.

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, one has to go back to May '13 to see a yield this low for the cost of lending money to the U.S. government for 30 years with no inflation protection."

"Watching the daily drop in bond yields both in the U.S. but especially in Europe is certainly a site to behold, and the panic for paper (yield) seems to be accelerating," he added.

The volatility seen earlier in the session came on the heel of a mixed batch of news, including calming remarks from Russian President Vladimir Putin and disappointing U.S. jobs data.

Trading on Friday may be impacted by reaction to producer price inflation data and how it will impact the outlook for interest rates.

Reports on industrial production, consumer sentiment, and New York manufacturing activity are also likely to attract some attention.