Treasuries Move Notably Higher On Disappointing Confidence Data

(RTTNews) - Treasuries moved notably higher during trading on Tuesday, more than offsetting the modest weakness seen in the previous session.

Bond prices moved to the upside in early trading and remained firmly positive throughout the remainder of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.9 basis points to 2.701 percent.

The strength among treasuries came following the release of a report from the Conference Board showing that consumer confidence has deteriorated by more than expected in February amid concerns about the short-term outlook.

The Conference Board said its consumer confidence index fell to 78.1 in February from a downwardly revised 79.4 in January.

Economists had been expecting the index to edge down to 80.1 from the 80.7 originally reported for the previous month.

Lynn Franco, Director of Economic Indicators at the Conference Board, said, "While expectations have fluctuated over recent months, current conditions have continued to trend upward."

"This suggests that consumers believe the economy has improved, but they do not foresee it gaining considerable momentum in the months ahead," she added.

The disappointing confidence data overshadowed a separate report from Standard & Poor's showing that home prices in major U.S. metropolitan areas rose by more than expected in the month of December.

Treasuries saw continued strength following the release of the results of the Treasury Department's auction of $32 billion worth of two-year notes, which attracted above average demand.

The two-year note auction drew a high yield of 0.34 percent and a bid-to-cover ratio of 3.60, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.30.

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

Economic data is likely to remain in focus on Wednesday, with the Commerce Department scheduled to release its report on new home sales.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of 35 billion worth of five-year notes.