Treasuries Show Notable Downturn After Seeing Early Strength

After an early move to the upside, treasuries showed a notable downturn over the course of the trading session on Monday.

Bond prices pulled back well off their early highs and into negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 3.362 percent after hitting a low of 3.262 percent.

With the turnaround on the day, the ten-year yield ended the session at its highest closing level in almost three months.

The downturn by treasuries came as stocks on Wall Street extended the notable rebound seen over the previous week.

Treasuries saw further downside after the Treasury Department revealed this month’s auction of $32 billion worth of ten-year notes attracted below average demand.

The ten-year note auction drew a high yield of 3.330 percent and a bid-to-cover ratio of 2.37, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.46.

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

The pullback by treasuries also came as traders looked ahead to the release of a closely watched report on consumer price inflation due to be released on Tuesday.

The report is expected to show a continued slowdown in the annual rate of consumer price growth to 8.1 percent in August from 8.5 percent in July.

Meanwhile, the annual rate of growth by core consumer prices, which exclude food and energy prices, is expected to tick up to 6.0 percent in August from 5.9 percent in July.

The data may not impact expectations for a 75 basis point interest rate increase by the Federal Reserve next week but could affect the outlook for future rate hikes.

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