Treasuries Show Strong Move Back To The Upside

Treasuries showed a significant move to the upside during trading on Tuesday, regaining ground following the sharp pullback seen over the previous session.

Bond prices moved moderately higher in morning trading before seeing further upside in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.8 basis points to 0.678 percent.

Treasuries reached new highs for the session following the release of the results of the Treasury Department’s auction of $32 billion worth of ten-year notes, which attracted much stronger than average demand.

The ten-year note auction drew a high yield of 0.700 percent and a bid-to-cover ratio of 2.69, while the ten previous ten-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.

Earlier in the day, treasuries moved higher following the release of a report from the Labor Department showing a notable decrease in U.S. consumer prices in the month of April.

The Labor Department said its consumer price index slid by 0.8 percent in April after falling by 0.4 percent in March.

The drop by the index, which matched economist estimates, reflects the largest monthly decline since December of 2008.

Excluding food and energy prices, core consumer prices fell by 0.4 percent in April after edging down by 0.1 percent in March. Economists had expected core prices to dip by 0.2 percent.

The drop in core prices was the biggest on record dating back to 1957 and reflected sharply lower prices for apparel, motor vehicle insurance, airline fares, and lodging away from home.

Compared to the same month a year ago, consumer prices in April were up by just 0.3 percent, reflecting the slowest annual growth since October of 2015.

The annual rate of growth on core consumer prices also slowed to 1.4 percent in April from 2.1 percent in March, showing the smallest increase since April of 2011.

On Wednesday, the Labor Department is scheduled to release a separate report on producer prices in the month of April.

Producer prices are expected to drop by 0.5 percent in April after dipping by 0.2 percent in March, while core producer prices are expected to come in unchanged after inching up by 0.2 percent.

The Treasury is also scheduled to announce the results of its auction of $22 billion worth of thirty-year bonds on Wednesday.

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