Treasuries Slide Firmly Into Negative Territory Following Disappointing Auctions

(RTTNews) - After seeing modest weakness early in the session, treasuries slid more firmly into negative territory over the course of the trading day on Tuesday.

Bond prices finished the day notably lower after ending last Friday's trading roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 7.5 basis points to 4.542 percent.

With the increase on the day, the ten-year yield ended the session at its highest closing level in almost a month.

The early weakness among treasuries came following the release of a report from the Conference Board unexpectedly showing a significant improvement in consumer confidence in the month of May.

The Conference Board said its consumer confidence index jumped to 102.0 in May from an upwardly revised 97.5 in April.

The rebound surprised economists, who had expected the consumer confidence index to decrease to 95.3 from the 97.0 originally reported for the previous month.

Dana M. Peterson, Chief Economist at The Conference Board, also noted average 12-month inflation expectations ticked up to 5.4 percent in May from 5.3 percent in April.

"Perhaps as a consequence, the share of consumers expecting higher interest rates over the year ahead also rose, from 55.2 percent to 56.2 percent," Peterson said.

Treasuries saw further downside as the Treasury Department revealed this month's auctions of $69 billion worth of two-year notes and $70 billion worth of five-year notes attracted well below average demand.

The two-year note auction drew a high yield of 4.917 percent and a bid-to-cover ratio of 2.41, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.67.

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, the five-year note auction drew a high yield of 4.553 percent and a bid-to-cover ratio of 2.30. The ten previous five-year note auctions had an average bid-to-cover ratio of 2.45.

The U.S. economic calendar remains relatively quiet on Wednesday, although the Federal Reserve's Beige Book may attract some attention later in the trading day.