Treasuries Move To The Upside After Seeing Initial Weakness

After an initial move to the downside, treasuries turned higher over the course of the trading session on Wednesday.

Bond prices bounced well off their early lows and firmly into positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.5 basis points to 0.684 percent.

The rebound by treasuries came as stocks on Wall Street fell sharply amid renewed concerns about the spiking number of new coronavirus cases in several U.S. states.

Treasuries benefited from their appeal as a safe haven as Florida’s Department of Health confirmed 5,508 new cases of COVID-19 on Tuesday, reflecting a new single-day record. The Sunshine State now has a total of 109,014 confirmed cases.

New York Governor Andrew Cuomo also announced that out-of-state visitors coming to New York, New Jersey and Connecticut from regions with high COVID-19 rates will be required to quarantine for 14 days.

A CNBC analysis of data compiled by Johns Hopkins University found the nation’s seven-day average of daily new Covid-19 cases spiked more than 30 percent compared with a week ago.

Texas, Arizona and California are among several states that have seen significant increases in coronavirus cases, with California reporting 6,219 new cases on Monday.

During congressional testimony on Tuesday, White House health advisor Dr. Anthony Fauci warned of a “disturbing surge” in coronavirus infections.

President Donald Trump has repeatedly blamed the jump in coronavirus cases on increased testing and doubled-down on his suggestion that testing should be slowed.

Treasuries saw continued strength after the Treasury Department revealed its auction of $47 billion worth of five-year notes attracted above average demand.

The five-year note auction drew a high yield of 0.330 percent and a bid-to-cover ratio of 2.58, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.45.

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 $41 billion worth of seven-year notes on Thursday.

Trading on Thursday may also be impacted by reaction to reports on weekly jobless claims and durable goods orders.

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