Treasuries Move Back To The Downside Amid Worries About Tapering

(RTTNews) - After moving higher over the course of the two previous sessions, treasuries pulled back on Wednesday amid lingering concerns about the outlook for monetary policy.

Bond prices came under pressure in early trading and accelerated to the downside in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.7 basis points to 2.844 percent.

The early weakness among treasuries was partly due to concerns that a recently announced budget agreement in Washington may lead the Federal Reserve to begin scaling back its asset purchases in the near future.

The budget agreement, announced by Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., after the close of trading on Tuesday, would fund the government for the next two fiscal years.

The proposal calls for $63 billion in sequester relief but would reduce the deficit by $23 billion through $85 billion in reforms and non-tax revenue.

Members of both houses of Congress are expected to vote on the bipartisan budget agreement before heading home for the holidays.

Further selling pressure was seen in reaction to the results of the Treasury Department's auction of $21 billion worth of ten-year notes, which attracted slightly below average demand.

The ten-year note auction drew a high yield of 2.824 percent and a bid-to-cover ratio of 2.61, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.71.

Following several quiet days, the economic calendar picks up on Thursday with the release of reports on weekly jobless claims, retail sales, and business inventories. Trading is likely to be impacted by how the data affects the outlook for the Fed's stimulus program.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $13 billion worth of thirty-year bonds.