Treasuries Give Back Ground Following Disappointing Five-Year Note Auction

(RTTNews) - After trending higher over the past few weeks, treasuries gave back some ground over the course of the trading day on Wednesday.

Bond prices showed a notable move to the downside in afternoon trading, ending the day firmly in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.2 basis points to 1.92 percent.

With the increase on the day, the ten-year yield regained some ground after ending the previous session at its lowest closing level in well over a month.

The pullback shown treasuries in afternoon trading came as the Treasury Department's auction of $35 billion worth of five-year notes attracted below average demand.

The five-year note auction drew a high yield of 1.387 percent and a bid-to-cover ratio of 2.35, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.63.

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, "The five-year auction was poor as the yield was above the when issued and the bid to cover of 2.54 was below the previous 12-month average."

Boockvar noted that direct and indirect bidders also took the smallest amount of a five-year auction since last October.

Earlier in the day, traders were reacting to a report from the Commerce Department showing an unexpected drop in durable goods orders in the month of February.

The report said durable goods orders fell by 1.4 percent in February following a downwardly revised 2.0 percent increase in January. The drop came as a surprise to economists, who had expected orders to climb by 0.7 percent.

Excluding a 3.5 percent decrease in orders for transportation equipment, durable goods orders still fell by 0.4 percent in February.

The report also showed a 1.4 percent drop in orders for non-defense capital goods excluding aircraft, an indicator of capital spending.

The Labor Department's weekly jobless claims report is likely to attract attention on Thursday along with the results of the Treasury's auction of $29 billion worth of seven-year notes.