Treasuries Extend Recent Move To The Downside

(RTTNews) - After turning lower over the course of the previous session, treasuries saw some further downside during trading on Tuesday.

Bond prices came under pressure early in the session and remained stuck in negative territory throughout the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 2.407 percent.

With the continued increase on the day, the ten-year yield climbed to its highest closing level in well over a month.

The weakness among treasuries came as traders continue to expect the Federal Reserve to raise interest rates at its meeting next month.

At a commercial real estate conference in New York, Boston Fed President Eric Rosengren suggested the central bank could be forced to raise interest rates at a faster pace if unemployment drops below 4 percent.

"Such an overheated economy would likely be accompanied by higher inflation, which in turn would likely elicit higher interest rates," Rosengren said.

Treasuries remained in the red following the release of the results of the Treasury Department's auction of $24 billion worth of three-year notes, which attracted average demand.

The three-year note auction drew a high yield of 1.572 percent and a bid-to-cover ratio of 2.76, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.78.

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 showing an unexpected increase in wholesale inventories in the month of March.

The report said wholesale inventories rose by 0.2 percent in March after climbing by 0.3 percent in February. Inventories had been expected to edge down by 0.1 percent.

Trading on Wednesday may be impacted by reaction to the results of the Treasury Department's auction of $23 billion worth of ten-year notes as well as a report on import and export prices.