2018.10.2315:20:00UTC+00Treasuries Pull Back Well Off Best Levels But Still Close Higher

After moving significantly higher early in the session, treasuries gave back ground over the course of the trading day on Tuesday.

Bond prices pulled back well off their best levels of the day but still closed in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to 3.170 percent after hitting a low of 3.111 percent.

The early strength among treasuries came as stocks on Wall Street extended the sell-off that was seen in the overseas markets amid worries about global economic growth and mounting geopolitical tensions.

A negative reaction to quarterly results from big-name companies such as 3M (MMM) and Caterpillar (CAT) also contributed to the sharp decline by stocks.

Stocks staged a notable recovery attempt over the course of the trading session, however, leading to the pullback by treasuries.

Treasuries also gave back ground following the release of the results of the Treasury Department's auction of $38 billion worth of two-year notes, which attracted below average demand.

The two-year note auction drew a high yield of 2.880 percent and a bit-to-cover ratio of 2.67, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.78.

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

Following a couple quiet days on the U.S. economic front, trading on Wednesday may be impacted by reaction to a report on new home sales as well as the Federal Reserve's Beige Book.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, may shed additional light on the outlook for interest.

Bond traders are also likely to keep an eye on the results of the Treasury's auction of $39 billion worth of five-year notes.