Treasuries Move Higher On Weaker Than Expected Consumer Confidence Data

Treasuries moved notably higher over the course of the trading day on Wednesday, extending the upward move seen in the previous session.

Bond prices moved steadily higher as the day progressed before closing firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.3 basis points to 2.414 percent.

The continued strength among treasuries came following the release of a mixed batch of U.S. economic data, including a report from the Conference Board showing a bigger than expected drop in consumer confidence.

The Conference Board said its consumer confidence index slumped to 122.1 in December from a downwardly revised 128.6 in November.

Economists had expected the consumer confidence index to edge down to 128.0 from the 129.5 originally reported for the previous month.

The bigger than expected decrease by the consumer confidence index came after it reached its highest level in seventeen years in November.

Meanwhile, a separate report from the National Association of Realtors showed pending home sales unexpectedly edged higher in the month of November.

NAR said its pending home sales index inched up by 0.2 percent to 109.5 in November after surging up by 3.5 percent to 109.3 in October. Economists had expected pending home sales to dip by 0.5 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

With the unexpected uptick, the pending home sales index reached its highest level since hitting 110.0 in June. The index is also up by 0.8 percent year-over-year.

Treasuries saw further upside even though the Treasury Department’s auction of $34 billion worth of five-year notes attracted slightly below average demand.

The five-year note auction drew a high yield of 2.245 percent and a bid-to-cover ratio of 2.36, while the ten previous five-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 Treasury is due to finish off this week’s series of long-term securities auctions with the sale of $28 billion worth of seven-year notes on Thursday.

Trading on Thursday may also be impacted by reaction to the Labor Department’s report on initial jobless claims in the week ended December 23rd.

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