Treasuries Move To The Upside Following Five-Year Note Auction

(RTTNews) - Treasuries moved moderately higher over the course of the trading day on Wednesday, benefiting from a positive reaction to the results of a five-year note auction.

Bond prices saw some volatility in early trading but climbed firmly into positive territory in afternoon trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.8 basis points to 2.673 percent.

The upward move by treasuries came following the release of the results of the Treasury Department's auction of $35 billion worth of five-year notes, which attracted stronger than average demand.

The five-year note auction drew a high yield of 1.53 percent and a bid-to-cover ratio of 2.98, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.59.

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 largely shrugged off a report from the Commerce Department showing that new home sales unexpectedly rebounded in the month of January.

The report said new home sales jumped 9.6 percent to a seasonally adjusted annual rate of 468,000 in January after falling 3.8 percent to a revised 427,000 in December. Economists had expected sales to drop to an annual rate of 400,000.

With the unexpected increase, new home sales rose to their highest level since hitting an annual rate of 477,000 in July of 2008.

Noting a separate report showing a drop in mortgage applications, Peter Boockvar, managing director at the Lindsey Group, said the rebound in sales may be due to all-cash buyers moving into the new home market with intentions to rent.

Economic data may impact trading on Thursday, with traders likely to keep an eye on the release of reports on durable goods orders and weekly jobless claims.

Additionally, Federal Reserve Chair Janet Yellen is scheduled to testify before the Senate Banking Committee after her originally scheduled appearance before the committee was postponed due to a snowstorm in Washington.

Bond trading could also be impacted by the release of the results of the Treasury's auction of $29 billion worth of seven-year notes.