After ending the previous session modestly higher, treasuries saw some further upside during trading on Tuesday.
Bond prices moved to the upside early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.2 basis points to 1.234 percent.
The advance by treasuries came as traders looked to the relative safety of bonds amid uncertainty ahead of the Federal Reserve’s monetary policy announcement on Wednesday.
Traders are likely to pay close attention to the Fed’s statement for any clues the central bank is considering scaling back its asset purchase program.
Treasuries may also have benefited from a Commerce Department report showing durable goods orders increased by much less than expected in the month of June.
The report said durable goods orders climbed by 0.8 percent in June after spiking by an upwardly revised 3.2 percent in May.
Economists had been expecting orders to surge up by 2.1 percent compared to the 2.3 percent jump that had been reported for the previous month.
Excluding orders for transportation equipment, durable goods orders rose by 0.3 percent in June following a 0.5 percent increase in May. Ex-transportation orders were expected to climb by 0.8 percent.
Meanwhile, a separate report from the Conference Board showed consumer confidence in the U.S. saw a slight improvement from an upwardly revised level in the month of July.
The Conference Board said its consumer confidence index inched up to 129.1 in July from an upwardly revised 128.9 in June. Economists had expected the index to drop to 124.9 from the 127.3 originally reported for the previous month.
With the unexpected uptick, the consumer confidence index reached its highest level since hitting 132.6 in February of 2020.
Treasuries remained positive as the Treasury Department revealed that this month’s auction of $61 billion worth of five-year notes attracted average demand.
The five-year note auction drew a high yield of 0.710 percent and a bid-to-cover ratio of 2.36, while the ten previous five-year note auctions had an average bid-to-cover ratio of 2.37.
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 Federal Reserve’s latest monetary policy announcement.