Treasuries are showing considerable strength in morning trading on Tuesday, as traders favored guaranteed returns amid indications of a continued pullback by stocks due to grim earnings expectations.
With the lack of significant economic reports on the day, earnings figures are likely to be the key driver for investors, who may also consider the day's long-term treasury auctions as a safety valve.
The ten-year benchmark note continues to show strength over the course of the morning, holding steadily in positive territory. Subsequently, the yield on the ten-year note is down 3.1 basis points at 2.908 percent.
At 1 p.m. ET, the Treasury Department plans to sell $6.0 billion of 10-year inflation immune treasuries, also called TIPS.
The previous auction was for $8.0 billion worth of the security, drawing a yield of 2.245 percent while attracting strong demand, with the bid-to-cover ratio coming in at 2.48.
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 results of the ten-year TIPS auction will be compared to the outcome of the regular ten-year note sale later in the week, with the spread indicative of near-term inflation.
At 11:30 a.m. ET, the government will auction $25.0 billion in 52-week bills set to mature April 8th, 2009.
The previous auction for comparable securities took place early last month, when the Treasury sold $24.0 billion worth of the securities. The auction drew a yield of 0.7 percent, while attracting unusually strong demand, with the bid-to-cover ratio coming in at 3.51.
The Treasury Department revealed Monday that it plans to sell $18.0 billion worth of ten-year notes later this week. Traders will be focused on the results of the sale, as the ten-year note is known as a benchmark security in the bond market.
The previous auction took place early last month, when the Treasury sold $18.0 billion worth of the ten-year security. The auction posted a high yield of 3.681 percent, while drawing modest demand, with the bid-to-cover ratio coming in at a level of 2.14.
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