Treasuries Give Back Ground Following Recent Strength

After moving notably higher over the two previous sessions, treasuries gave back some ground during trading on Wednesday.

Bond prices fluctuated early in the session but slid more firmly into negative territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.6 basis points to 3.432 percent.

The pullback by treasuries came following the release of a Commerce Department report showing new orders for U.S. manufactured durable goods surged by much more than expected in March amid a substantial rebound in orders for transportation equipment.

The report said durable goods orders spiked by 3.2 percent in March after tumbling by a revised 1.2 percent in February.

Economists had expected durable goods orders to climb by 0.8 percent compared to the 1.0 percent slump that had been reported for the previous month.

Excluding the jump in orders for transportation equipment, durable goods orders rose by 0.3 percent in March after falling by 0.3 percent in February. Ex-transportation orders were expected to dip by 0.2 percent.

Meanwhile, the report said orders for non-defense capital goods excluding aircraft, a key indicator of business spending, fell by 0.4 percent in March after sliding by 0.7 percent in February.

Shipments in the same category, which is the source data for equipment investment in GDP, also decreased by 0.4 percent for the second consecutive month.

Treasuries remained firmly negative even though the Treasury Department revealed month’s auction of $43 billion worth of five-year notes attracted above average demand.

The five-year note auction drew a high yield of 3.500 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 2.42.

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, a preliminary reading on first quarter GDP is likely to attract attention on Thursday along with reports on weekly jobless claims and pending home sales.

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