FX.co ★ Treasuries Regain Ground Following Recent Weakness

During Wednesday's trading, Treasury bonds demonstrated a strong recovery, compensating for the significant decline observed over the previous two days. Despite initially losing ground after an initial surge, bond prices gradually rose throughout the day. As a result, the yield on the benchmark ten-year note that functions inversely to its price decreased by 7.4 basis points to 4.585 percent.

The recovery in Treasury bonds could be attributed to bargain purchases, especially considering the decline in the ten-year yield that followed its new five-month closing peak on Tuesday. Recent remarks by Federal Reserve Chair Jerome Powell, combined with persistent inflation data and sustained economic fortitude, have led to lowered anticipations for a rate cut in June, thereby placing pressure on Treasury bonds.

As suggested by the FedWatch Tool from the CME Group, the likelihood of a 25-basis point rate reduction in June has decreased dramatically to 16.4 percent, compared to 55.2 percent just a week earlier.

Treasury bonds maintained their strengthening position into the afternoon trading session after the Treasury Department announced exceptional demand for this month's auction of $13 billion worth of twenty-year bonds. The twenty-year bond auction yielded 4.818 percent with a bid-to-cover ratio of 2.82. In comparison, the average bid-to-cover ratio for the past ten twenty-year bond auctions was 2.63. The bid-to-cover ratio is indicative of demand, reflecting the number of bids for each dollar's worth of securities sold.

Thursday's trading might be influenced by responses to the latest U.S. economic data, which includes weekly jobless claims, existing home sales, and industrial activity in the Philadelphia region.