Treasuries Extend Upward Move Following Strong Two-Year Note Auction

(RTTNews) - After ending the previous session modestly higher, treasuries saw some further upside over the course of the trading day on Tuesday.

Bond prices saw modest strength in morning trading before climbing more firmly into positive territory in the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 2.535 percent.

With the drop, the ten-year yield closed lower for the third consecutive session, pulling back further off last Thursday's two-month closing high.

Geopolitical concerns contributed to the early strength among treasuries amid news that the U.S. has expanded its military campaign against the Islamic State into Syria for the first time.

U.S. Central Command said U.S. military forces and partner nations attacked the terrorists in Syria using a mix of fighters, bombers, remotely piloted aircraft and Tomahawk Land Attack Missiles.

A statement from President Obama highlighted the fact that the U.S. was joined in the attack by Saudi Arabia, the United Arab Emirates, Jordan, Bahrain, and Qatar.

Treasuries saw further buying interest in afternoon trading following the release of the results of the Treasury Department's auction of $29 billion worth of two-year notes, which attracted above average demand.

The two-year note auction drew a high yield of 0.589 percent and a bid-to-cover ratio of 3.56, while the ten previous two-year note auctions had an average bid-to-cover ratio of 3.42.

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, the yield at a multi-year high was attractive enough to buyers."

Following today's lack of major U.S. economic data, trading on Wednesday may be impacted by the Commerce Department's report on new home sales.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $35 billion worth of five-year notes.