Treasuries Close Roughly Flat After Early Volatility

After seeing considerable volatility early in the session on Tuesday, treasuries turned in a lackluster performance for the remainder of the day.

Bond prices spent the afternoon lingering near the unchanged line before closing roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.362 percent.

The roughly flat close came after the ten-year yield reached a one-year intraday high of 1.389 percent in early trading.

The volatility seen early in the day came as traders kept an eye on Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee.

In a widely anticipated move, Powell told members of committee the central bank is likely to maintain ultra-easy monetary policy for the foreseeable future.

Powell’s prepared remarks largely mirrored recent assessments, indicating interest rates will remain at near-zero levels and the Fed will continue its asset purchases at the current rate until “substantial further progress” has been made toward its goals of maximum employment and price stability.

“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said.

With regard to inflation, Powell acknowledged that consumer prices have partially rebounded following the steep drop last spring but noted prices for sectors that have been most adversely affected by the pandemic remain “particularly soft.”

The Fed chief said annual inflation remains below the central bank’s 2 percent target and reiterated monetary policy is likely to remain unchanged until inflation is on track to moderately exceed 2 percent for “some time.”

Powell stressed that the Fed remains committed to using its full range of tools to support the economy and to help ensure the recovery will be as robust as possible.

On the U.S. economic front, the Conference Board released a report showing consumer confidence has improved more than expected in the month of February.

The Conference Board said its consumer confidence index rose to 91.3 in February from a downwardly revised 88.9 in January.

Economists had expected the consumer confidence index to inch up to 90.0 from the 89.3 originally reported for the previous month.

Meanwhile, traders largely shrugged off the results of the Treasury Department’s auction of $60 billion worth of two-year notes, which attracted below average demand.

The two-year note auction drew a high yield of 0.119 percent and a bid-to-cover ratio of 2.44, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.60.

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

Looking ahead, the Treasury is due to announce the results of its auction of $61 billion worth of five-year notes on Wednesday.

Powell’s second day of testimony on Capitol Hill may also attract some attention on Wednesday along with a report on new home sales in the month of January.

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