Treasuries Regain Ground But Close Well Off Early Highs

After trending lower over the past few sessions, treasuries moved back to the upside during the trading day on Monday.

Bond prices gave back ground after an early advance but remained in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 1.829 percent.

The early strength among treasuries was partly due to bargain hunting, with disappointing Chinese export data increasing the appeal of safe havens such as bonds.

Treasuries also benefited from worries about rising tensions between the U.S. and North Korea after North Korea conducted a “very important test” at a long-range missile launch site.

President Donald Trump warned North Korean leader Kim Jong Un risks losing “everything” if he acts in a hostile way, leading a North Korean official to describe the president as a “heedless and erratic old man.”

Trading activity remained somewhat subdued, however, with traders looking ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged, although traders are still likely to pay close attention to the accompanying statement for clues about the outlook for rates.

A lack of major U.S. economic data may also be keeping some traders on the sidelines ahead of the release of reports on retail sales and consumer and producer prices in the coming days.

Meanwhile, traders largely shrugged off the results of the Treasury Department’s auction of $38 billion worth of three-year notes, which attracted modestly above average demand.

The three-year note auction drew a high yield of 1.632 percent and a bid-to-cover ratio of 2.56, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.49.

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 Treasury Department is due to announce the results of its auction of $24 billion worth of ten-year notes on Tuesday.

Revised readings on labor productivity and costs in the third quarter may also attract attention on Tuesday, but trading activity is likely to remain relatively light as the Fed announcement looms.

The material has been provided by InstaForex Company – www.instaforex.com