Treasuries Close Nearly Unchanged For Second Straight Day

After ending the previous session nearly unchanged, treasuries showed a lack of direction over the course of the trading day on Tuesday.

Bond prices recovered from an initial move to the downside and spent the rest of the day lingering near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.935 percent.

The choppy trading on the day came amid light volume, as many traders remain away from their desks ahead of the New Year's Day holiday on Friday.

A lack of major U.S. economic data also kept some traders on the sidelines ahead of the release of reports on pending home sales and weekly jobless claims in the coming days.

Traders also kept an eye on the latest developments in Washington after President Donald Trump signed a coronavirus relief and government spending bill over the weekend.

Trump has called for the direct payments included in the bill to be increased to $2,000 from $600, and the House voted Monday to approve a measure increasing the size of the stimulus checks.

However, Senate Majority Leader Mitch McConnell, R-Ken., blocked an effort by Senate Minority Leader Chuck Schumer, D-N.Y., to unanimously approve the House bill.

The bond market shrugged off the results of the Treasury Department's auction of $59 billion worth of seven-year notes, which attracted below average demand.

The seven-year note auction drew a high yield of 0.662 percent and a bid-to-cover ratio of 2.31, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 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.

On Monday, the Treasury revealed its auctions of $58 billion worth of two-year notes and $59 billion worth of five-year notes also attracted below average demand.

Trading on Wednesday may be impacted by reaction to reports on Chicago-area business activity and pending home sales, although trading activity is likely to remain relatively subdued.

Market Analysis