Treasuries Move Back To The Downside Amid Easing Syria Worries

(RTTNews) - Treasuries came under pressure during trading on Tuesday as traders reacted to the latest developments regarding the situation in Syria.

After moving to the downside in early trading, treasuries remained firmly in negative territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 6.2 basis points to 2.959 percent.

The pullback by treasuries, which came on the heels of two days of gains, reflected cautious optimism that diplomatic efforts may avert proposed U.S. military action against Syria.

The budding optimism came amid reports that Syria has accepted a Russian proposal to give up its chemical weapons.

According to Russia's Interfax news agency, Syrian Foreign Minister Walid Moallem told the speaker of the Russian parliament that the Syrian government has agreed to the initiative.

Moallem's remarks were seen as more definitive than a statement on Monday in which he said Syria "welcomes" the Russian proposal.

The Russian proposal calls for Syria to put its chemical weapons stores under international control with plans for their subsequent destruction.

The proposal also calls for Syria to ratify the Chemical Weapons Convention, which outlaws the production, stockpiling, and use of chemical weapons.

In an interview with NBC News on Monday, Obama indicated that the proposal would be a potential breakthrough, although he said he remains skeptical that Syria will follow through.

Treasuries regained some ground in mid-day trading but moved back to the downside following the release of the results of the Treasury Department's auction of $31 billion worth of three-year notes.

The three-year note auction drew a high yield of 0.913 percent and a bid-to-cover ratio of 3.29, while the ten previous three-year note auctions had an average bid-to-cover ratio of 3.36.

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

Trading on Wednesday may be impacted by reaction to Obama's national address on Syria, which is scheduled for about 9 pm ET tonight.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $21 billion worth of ten-year notes.