Treasuries Close Firmly Positive Amid Geopolitical Concerns

(RTTNews) - Treasuries saw some volatility as the trading day progressed on Tuesday but managed to end the session notably higher.

Bond prices showed a strong move to the upside in afternoon trading and managed to remain firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to 2.586 percent.

The strength among treasuries was partly due to concerns about the escalating conflict in the Middle East amid a report from the Wall Street Journal indicating that Syrian warplanes struck targets in western Iraq.

The attack was reportedly part of an effort by foreign allies of Baghdad's Shiite-dominated government to shore up Iraqi armed forces and curb the advances of Sunni insurgents.

Treasuries also seemed to react positively to the Treasury Department's sale of $30 billion worth of two-year notes even though the auction attracted below average demand.

The two-year note auction drew a high yield of 0.511 percent and a bid-to-cover ratio of 3.23, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.39.

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

Meanwhile, traders seemed to shrug off a pair of much better than expected U.S. economic reports, including a Commerce Department report showing that new home sales jumped to a six-year high in May.

The report said new home sales soared 18.6 percent to a seasonally adjusted annual rate of 504,000 in May after rising 3.7 percent to a revised rate of 425,000 in April. Economists had expected sales to climb to a rate of 440,000.

With the much bigger than expected increase, new home sales reached their highest level since hitting a matching rate in May of 2008.

Additionally, the Conference Board said its consumer confidence index jumped to 85.2 in June from a revised 82.2 in May, reaching its highest level since January of 2008.

Economists had expected the consumer confidence index to edge up to 83.5 from the 83.0 originally reported for the previous month.

While significant developments overseas could impact trading on Wednesday, traders are also likely to keep an eye on a report on durable goods orders as well as the results of an auction of $35 billion worth of five-year notes.