2021.10.2619:15:00UTC+00Treasuries Extend Rebound After Strong Demand For Two-Year Note Auction

After showing a lack of direction in morning trading on Tuesday, treasuries moved modestly higher over the course of the afternoon.

Bond prices extended the upward move seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.6 basis points to 1.619 percent.

With the decrease on the day, the ten-year yield pulled back further off the five-month closing high set last Thursday.

The higher close by treasuries came after the Treasury Department revealed this month's auction of $60 billion worth of two-year notes attracted above average demand.

The two-year note auction drew a high yield of 0.481 percent and a bid-to-cover ratio of 2.69, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.51.

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 some upbeat U.S. economic data, including a report from the Commerce Department showing new home sales in the U.S. skyrocketed in the month of September.

The report said new home sales soared by 14.0 percent to an annual rate of 800,000 in September after falling by 1.4 percent to a downwardly revised rate of 702,000 in August.

Economists had expected new home sales to jump by 2.7 percent to an annual rate of 760,000 from the 740,000 originally reported for the previous month.

A separate report from the Conference Board showed consumer confidence reversed a three-month downward trend in October amid easing concerns about the Delta variant of the coronavirus.

The Conference Board said its consumer confidence index climbed to 113.8 in October from an upwardly revised 109.8 in September.

The rebound surprised economists, who had expected the consumer confidence index to edge down to 109.0 from the 109.3 originally reported for the previous month.

Looking ahead, a report on new orders for U.S. manufactured durable goods in the month of September may attract attention on Wednesday. Durable goods orders are expected to slump by 1.1 percent.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $61 billion worth of five-year notes.