2023.12.2619:09:00UTC+00Treasuries Move Slightly Higher Following Two-Year Auction

Treasuries showed a lack of direction throughout much of the trading session on Tuesday before ending the day modestly higher.

Bond prices moved to the upside in the latter part of the session after spending most of the day lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 3.886 percent.

The late-day uptick by treasuries came after the Treasury Department revealed this month's auction of $57 billion worth of two-year notes attracted roughly average demand.

The two-year note auction drew a high yield of 4.314 percent and a bid-to-cover ratio of 2.68, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.71.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Treasuries also continued to benefit from optimism about the outlook for interest rates following last week's tamer-than-expected consumer price inflation data.

On the heels of the data, CME Group's FedWatch Tool is indicating a 72.7 percent chance the Federal Reserve will cut rates by a quarter point in March.

Overall trading activity was somewhat subdued, however, as many traders remained away from their desks following the Christmas weekend. A lack of major U.S. economic data also kept traders on the sidelines.

Amid another quiet day on the U.S. economic front, trading on Wednesday may be impacted by reaction to the results of the Treasury's auction of $58 billion worth of five-year notes.