Treasuries Extend Pullback After Seeing Initial Strength

After an initial move to the upside, treasuries moved notably lower over the course of the trading session on Wednesday.

Bond prices fluctuated in afternoon trading before ending the day firmly in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 7.2 basis points to 0.820 percent.

With the increase on the day, the ten-year yield extended the rebound seen on Tuesday, climbing further off its record lows.

The continued pullback by treasuries came as traders kept an eye on the latest developments regarding the coronavirus outbreak.

Total confirmed coronavirus cases have climbed to nearly 122,000 worldwide, according to data compiled by Johns Hopkins University, while the total number of deaths is closing in on 4,400.

Johns Hopkins also said the number of confirmed cases in the U.S. has jumped to more than 1,100 from just over 100 a week ago.

German Chancellor Angela Merkel has warned that up to 70 percent of the German population could become infected with the coronavirus.

The World Health Organization recently declared the coronavirus outbreak a global pandemic, citing the disease’s rapid spread outside of China.

“We’re deeply concerned both by the alarming levels of spread and severity, and by the alarming levels of inaction,” said WHO Director-General Dr. Tedros Adhanom Ghebreyesus. “We have therefore made the assessment that COVID-19 can be characterized as a pandemic.”

Traders are also closely watching efforts to limit the economic impact of the outbreak, with the Bank of England announcing an emergency 50 basis point interest rate cut to a record low of 0.25 percent.

Meanwhile, the Treasury Department revealed that this month’s auction of $24 billion worth of ten-year notes attracted modestly below average demand.

The ten-year note auction drew a high yield of 0.849 percent and a bid-to-cover ratio of 2.36, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.41.

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 Treasury is scheduled to announce the results of its auction of $16 billion worth of thirty-year bonds on Thursday.

On the U.S. economic front, a report released by the Labor Department showed a modest increase in consumer prices in the month of February.

The Labor Department said its consumer price index inched up by 0.1 percent in February, matching the uptick seen in January. Economists had expected prices to come in unchanged.

Consumer prices edged higher as higher prices for food and shelter more than offset a steep drop in energy prices.

The report said core consumer prices, which exclude food and energy prices, rose by 0.2 percent for the second consecutive month. The increase in core prices matched economist estimates.

News on the coronavirus front is likely to remain in focus on Thursday, overshadowing reports on producer prices and weekly jobless claims.

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