Treasuries Move Modestly Higher, Extending Recent Upward Move

(RTTNews) - After moving notably higher over the course of the two previous sessions, treasuries saw some further upside during trading on Wednesday.

Bond prices spent much of the day near the unchanged line before moving modestly higher going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.9 basis points to 1.969 percent.

The continued strength among treasuries came as traders kept an eye on Federal Reserve Chair Janet Yellen's second day of testimony on Capitol Hill.

Yellen's prepared remarks were identical to those she delivered yesterday, with the Fed chief reiterating that the central bank is not likely to begin raising interest rates for at least the next couple monetary policy meetings.

In the question-and-answer portion of her testimony, Yellen said inflation is likely to move lower before it goes higher and noted that inflation will be one of the key factors driving monetary policy.

Meanwhile, the modest upward move by treasuries came even though 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 1.480 percent and a bid-to-cover ratio of 2.54, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.66.

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 economic front, the Commerce Department released a report showing that U.S. new home sales came in well above economist estimates in the month of January.

The report said new home sales dipped by just 0.2 percent to an annual rate of 481,000 in January from the revised December rate of 482,000.

While new home sales pulled back off the more than six-year high set in the previous month, the rate still far exceeded economist estimates of 470,000.

Economic data may be in focus on Thursday, with traders likely to keep an eye on reports on consumer prices, durable goods orders, and weekly jobless claims.

The Treasury is also due to finish off this week's series of long-term securities auctions with the sale of $29 billion worth of seven-year notes.