Treasuries showed some strength on Tuesday, as some investors moved their money from riskier investments such as stocks and into the safety of bonds ahead of what is expected to be a disappointing earnings reporting season.
With a lack of significant economic news on the day, some traders focused on the Treasury Department's sales of ten-year TIPS notes along with 52-week and 4-week bills. Demand for the securities was relatively strong, as investors seemed to shrug off supply concerns, despite a record three-year note auction on tap for Wednesday.
After seeing some volatility during morning trading, the benchmark ten-year note hovered in positive territory throughout the day. Subsequently, the yield on the benchmark ten-year note closed at 2.909 percent, down 3.0 basis points on the session.
Earlier this afternoon, the Treasury Department completed its sale of ten-year inflation protected notes, known as TIPS. The auction of $6.0 billion worth of the notes posted an interest rate of 2.125 percent, while drawing a high-yield of 1.589 percent.
The demand for the notes was modest, with the bid-to-cover ratio coming in at 2.25. The security is set to mature January 15th, 2019.
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 previous auction for comparable securities took place in January, when $8.0 billion worth of the securities was sold. The auction drew a yield of 2.245 percent, while attracting strong demand, with the bid-to-cover ratio coming in at 2.48.
The results of the ten-year TIPS auction are closely watched, as the spread between the security and the regular ten-year note will give an indication of near-term inflation.
Earlier in the day, the Treasury Department completed its auctions of 52-week and 4-week bills.
Looking ahead to Wednesday, the Treasury plans to hold a record auction of $35.0 billion worth of three-year notes. The sale will take place at 1 p.m. ET.
The government sold $34.0 billion worth of the security early last month, drawing a high yield of 1.489 percent and posting moderate demand, with the bid-to-cover ratio coming in at 2.26.
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