Treasuries Give Back Ground Following Recent Uptrend

(RTTNews) - Treasuries moved modestly lower during trading on Tuesday, giving back some ground after trending higher over the past few sessions.

After coming under pressure in early trading, bond prices climbed off their worst levels but remained in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 2.2 basis points to 2.25 percent.

The modest pullback by treasuries came as traders looked ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged following the meeting, but traders are likely to keep a close eye on the accompanying statement.

Many analysts still expect the Fed to raise interest rates at its next meeting in September and will be closely scrutinizing the statement for any hints about the timing of the first rate hike.

Meanwhile, traders largely shrugged off a report from the Conference Board showing a substantial deterioration in U.S. consumer confidence in the month of July.

The Conference Board said its consumer confidence index tumbled to 90.9 in July from 99.8 in June. Economists had expected the index to show a much more modest decrease to a reading of 99.6.

Lynn Franco, Director of Economic Indicators at the Conference Board, said, "A less optimistic outlook for the labor market, and perhaps the uncertainty and volatility in financial markets prompted by the situation in Greece and China, appears to have shaken consumers' confidence."

"Overall, the Index remains at levels associated with an expanding economy and a relatively confident consumer," she added.

Treasuries also remained stuck in the red following the release of the results of the Treasury Department's auction of $26 billion worth of two-year notes, which attracted average demand.

The two-year note auction drew a high yield of 0.690 percent and a bid-to-cover ratio of 3.42, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.42.

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

Looking ahead, the Fed is likely to be in the spotlight on Wednesday, overshadowing a report on pending home sales as well as the Treasury's auction of $35 billion worth of five-year notes.