Treasuries Close Firmly Positive After Thirty-Year Bond Auction

(RTTNews) - After initially showing a lack of direction, treasuries moved notably higher on Thursday following the Treasury Department's thirty-year bond auction.

Bond prices surged higher following the release of the auction results, ending the day firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.4 basis points to 2.586 percent.

With the notable decrease on the day, the ten-year yield gave back some ground after ending the previous session at its best closing level in a month.

The strength among treasuries came after the Treasury revealed that its auction of $13 billion worth of thirty-year bonds attracted strong demand.

The thirty-year bond auction drew a high yield of 3.444 percent and a bid-to-cover ratio of 2.69. The yield was about two basis points below the yield at the bidding deadline, and the bid-to-cover ratio was well above the recent average of 2.35.

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

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, pension funds and insurance companies are typically the main players this far out on the curve and today's auction was excellent as buyers took advantage of one-month highs in yields."

"Any concern with higher inflation was not reflected here ahead of the PPI tomorrow and CPI next week, and the solid auction has led to a further rally across the curve," he added.

Treasuries may also have benefited from a report showing weaker than expected U.S. sales growth in May as well as concerns about escalating violence in Iraq.

Trading on Friday may be impacted by the release of a pair of reports on producer price inflation and consumer sentiment.