Treasuries Show Notable Move To The Upside

(RTTNews) - After ending the previous session nearly flat, treasuries showed a strong move to the upside during trading on Tuesday.

Bond prices moved steadily higher throughout much of the session before closing firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.8 basis points to 1.545 percent.

The strength among treasuries came following the release of a report from the Labor Department showing an unexpected drop in labor productivity in the second quarter.

The report showed that productivity fell by 0.5 percent in the second quarter after sliding by 0.6 percent in the first quarter. The decrease came as a surprise to economists, who had expected productivity to climb by 0.5 percent.

Meanwhile, the Labor Department said unit labor costs surged up by 2.0 percent in the second quarter after edging down by a revised 0.2 percent in the first quarter.

Economists had expected labor costs to climb by 1.8 percent compared to the 4.5 percent jump that had been reported for the previous quarter.

A separate report from the Commerce Department showed an unexpected increase in wholesale inventories in the month of June.

The report said wholesale inventories rose by 0.3 percent in June following an upwardly revised 0.2 percent increase in May.

Economists had expected inventories to come in unchanged compared to the 0.1 percent uptick that had been reported for the previous month.

Meanwhile, the Commerce Department said wholesale sales shot up by 1.9 percent in June following a 0.7 percent increase in May.

Treasuries saw some further upside following the release of the results of the Treasury Department's auction of $24 billion worth of three-year notes, which attracted above average demand.

The three-year note auction drew a high yield of 0.850 percent and a bid-to-cover ratio of 2.98, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.86.

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

Amid a quiet day on the U.S. economic front, trading on Wednesday may be impacted by reaction to the Treasury's auction of $23 billion worth of ten-year notes.