Following the rebound seen over the course of the previous session, treasuries saw further upside during the trading day on Tuesday.
Bond prices surged early in the session and remained firmly positive throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 8.6 basis points to 2.993 percent.
The ten-year yield added to the 4.4 basis point drop seen on Monday, continuing to give back ground after reaching its highest levels since November 2018.
The continued rebound by treasuries came as some traders feel the recent weakness in the bond market has been overdone.
While the Federal Reserve is expected to continue raising interest rates in the coming months, recent comments suggest the central bank will stick to raising rates by 50 basis points instead of the 75 basis points some have feared.
Treasuries remained firmly positive after the Treasury Department revealed this month’s auction of $45 billion worth of three-year notes attracted strong demand.
The three-year note auction drew a high yield of 2.809 percent and a bid-to-cover ratio of 2.59, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.43.
The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Trading on Wednesday is likely to be driven by reaction to the Labor Department’s report on consumer price inflation in the month of April.
Bond traders are also likely to keep an eye on the results of the Treasury’s auction of $36 billion worth of ten-year notes.