Treasuries Give Back Ground Following Recent Strength

Treasuries showed a notable move to the downside over the course of the trading day on Tuesday, giving back ground after trending higher in recent sessions.

Bond prices fluctuated early in the session but slid firmly into negative territory as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 4.8 basis points to 1.783 percent.

The pullback by treasuries may partly have reflected profit taking ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is likely to leave interest rates unchanged when announcing its decision, although the accompanying statement could hint at the first rate hike as early as the next meeting in mid-March.

CME Group’s FedWatch Tool is currently indicating an 88.2 percent chance that the Fed will raise interest rates by a quarter point in March.

In U.S. economic news, the Conference Board released a report showing consumer confidence pulled back by less than expected in the month of January.

The Conference Board said its consumer confidence index dipped to 113.8 in January after climbing to a revised 115.2 in December. Economists had expected the index to drop to 111.9 from the 115.8 originally reported for the previous month.

Meanwhile, bond traders largely shrugged off the results of the Treasury Department’s auction of $55 billion worth of five-year notes, which attracted above average demand.

The five-year note auction drew a high yield of 1.533 percent and a bid-to-cover ratio of 2.50, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.39.

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

The Fed announcement is likely to be in the spotlight on Wednesday, overshadowing a report on new home sales in December.

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