Treasuries Close Moderately Higher Following Afternoon Volatility

(RTTNews) - Treasuries saw considerable volatility over the course of the trading day on Wednesday before ending the session moderately higher.

Bond prices showed big swings in afternoon trading but managed to end the day in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2 basis points to 2.33 percent.

With the decrease on the day, the ten-year yield extended the sharp drop seen on Tuesday, ending the session at its lowest closing level in over a year.

The higher close by treasuries reflected a positive reaction to the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes were interpreted as dovish, as Fed officials expressed concerns about global economic weakness and the impact of a stronger U.S. dollar.

Suggestions that the appreciation of the dollar might slow the increase in inflation helped offset concerns about the central bank raising interest rates sooner than anticipated.

At the same time, the minutes showed that some members were concerned that the Fed's reference to leaving rates unchanged for a "considerable time" after its asset purchase program ends could be misunderstood as a commitment rather than as data dependent.

Most participants subsequently indicated a preference for clarifying the dependence of the current forward guidance on economic data.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Bottom line, there are a lot of differing opinions in the minutes and we can all take out what suits us, but markets love any hint that the doves are in control and they certainly got that continued sense within the minutes."

Earlier in the afternoon, treasuries pulled back sharply following the release of disappointing results from the Treasury Department's auction of $21 billion worth of ten-year notes.

The ten-year note auction drew a high yield of 2.381 percent and a bid-to-cover ratio of 2.52, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.71.

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

"It seemed that the lowest yield since June '13 in the 10-year note was enough to look unattractive to those participating in today's auction," Boockvar said.

Following several quiet days on the U.S. economic front, trading on Thursday could be impacted by the Labor Department's weekly jobless claims report.

The Treasury is also due to finish off this week's series of long-term securities auctions with the sale of $13 billion worth of thirty-year bonds.