Treasuries Show Another Modest Move To The Downside

(RTTNews) - After moving slightly lower over the course of the previous session, treasuries showed another modest move to the downside during trading on Tuesday.

Bond prices regained ground after coming under pressure early in the day but remained in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, crept up 1.5 basis points to 3.833 percent.

Treasuries continued to edge lower as traders looked ahead to Friday's release of a Commerce Department report on personal income and spending in the month of July, which includes readings on inflation said to be preferred by the Federal Reserve.

Economists currently expected the report to show the annual rate of consumer price growth was unchanged at 2.5 percent, while the annual rate of core consumer price is expected to tick up to 2.7 percent in July from 2.6 percent in June.

While the data is not likely to affect optimism the Fed will lower rates next month, it could impact expectations for how quickly the central bank cuts rates.

During his speech at the Jackson Hole Economic Symposium last Friday, Fed Chair Jerome Powell said the "time has come for policy to adjust" but noted the "timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

The dip by treasuries may also have reflected easing concerns about the economic outlook after the Conference Board released a report unexpectedly showing a modest improvement by U.S. consumer confidence in the month of August.

The report said the Conference Board's consumer confidence index rose to 103.3 in August from an upwardly revised 101.9 in July.

The increase surprised economists, who had expected the consumer confidence index to edge down to 100.1 from the 100.3 originally reported for the previous month.

Treasuries regained some ground after the Treasury Department revealed this month's auction of $69 billion worth of two-year notes attracted modestly above average demand.

The two-year note auction drew a high yield of 3.874 percent and a bid-to-cover ratio of 2.68, while the ten previous two-year note auctions drew a high yield of 2.62.

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 Treasury is due to announce the results of this month's auctions of $70 billion worth of five-year notes on Wednesday.