Treasuries Move Lower As 5-Year Note Auction Attracts Below Average Demand
After turning in a lackluster performance in morning trading on Monday, treasuries came under pressure over the course of the afternoon.
Bond prices pulled back firmly into negative territory after lingering near the unchanged line earlier in the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2 basis points to 0.609 percent.
The afternoon pullback by treasuries came after the Treasury Department revealed weaker than average demand for its auction of $49 billion worth of five-year notes.
The five-year note auction drew a high yield of 0.288 percent and a bid-to-cover ratio of 2.32, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.46.
The release of the results of the five-year note auction came after the Treasury showed that its auction of $48 billion worth of two-year notes also attracted below average demand.
Optimism about additional fiscal stimulus may also have reduced the appeal of safe havens like bond after Treasury Secretary Steven Mnuchin said Republicans have finalized their new coronavirus relief legislation.
Mnuchin told “Fox News Sunday” the GOP intends to introduce the $1 trillion bill on Monday after delaying the planned rollout last week.
Despite the vast gap in the price tags of the Republican plan and a $3 trillion bill passed by the Democrat-controlled House, Mnuchin said he expects lawmakers can move “very quickly” to address the differences.
“We’ve moved quickly before and I see no reason why we can’t move quickly again,” Mnuchin said. “And if there are issues that take longer, we’ll deal with those as well.”
White House economic advisor Larry Kudlow revealed in a separate interview with CNN’s “State Of The Union” that the GOP relief bill includes another $1,200 stimulus payment to Americans.
In economic news, the Commerce Department released report showing durable goods orders continued to move sharply higher in the month of June.
The Commerce Department said durable goods orders surged up by 7.3 percent in June after skyrocketing by a downwardly revised 15.1 percent in May. The continued increase comes following the nosedive seen in March and April.
Economists had expected durable goods orders to soar by 7.2 percent compared to the 15.7 percent spike that had been reported for the previous month.
Excluding another substantial increase in orders for transportation equipment, durable goods orders still jumped by 3.3 percent in June after shooting up by 3.6 percent in May. Ex-transportation orders were expected to surge up by 3.5 percent.
On Tuesday, the Treasury Department is due to announce the results of its auction of $44 billion worth of seven-year notes.
Traders are also likely to keep an eye on a report on consumer confidence in the month of July, although trading activity may be somewhat subdued ahead of the Federal Reserve’s monetary policy decision on Wednesday.