Treasuries Move Significantly Lower Amid Optimism About Coronavirus Vaccine

Treasuries moved significantly lower during trading on Tuesday, extending the pullback seen over the past few sessions.

Bond prices came under pressure early in the session and saw some further downside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.4 basis points to 0.658 percent.

The ten-year yield closed higher for the third straight session, ending the day at its highest closing level in over a month.

The weakness among treasuries came following news that Russia has approved a coronavirus vaccine, with Russian President Vladimir Putin claiming the vaccine works “quite effectively.”

“It forms a stable immunity and, I repeat, has passed all the necessary checks,” Putin said at a meeting with members of the government, according to RIA Novosti.

The speed of the development of the vaccine has raised questions about its safety, although the news has still generated optimism the coronavirus pandemic can be contained in the relatively near future.

Traders also continue to express optimism the U.S. will eventually pass a new coronavirus relief bill, with both sides signaling a willingness to restart stalled negotiations.

In U.S. economic news, the Labor Department released a report showing producer prices climbed by more than expected in the month of July.

The Labor Department said its producer price index for final demand rose by 0.6 percent in July after dipping by 0.2 percent in June.

The rebound in producer prices reflected the largest increase since October of 2018 and exceeded economist estimates for an uptick of 0.3 percent.

Excluding food and energy prices, core producer prices still climbed by 0.5 percent in July after falling by 0.3 percent in June. Economists had expected core prices to inch up by 0.1 percent.

Meanwhile, the Treasury Department revealed that this month’s auction of $48 billion worth of three-year notes attracted average demand.

The three-year note auction drew a high yield of 0.179 percent and a bid-to-cover ratio of 2.44, while the ten previous three-year note auctions had an average bid-to-cover ratio of 2.46.

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 $38 billion worth of ten-year notes on Wednesday.

A report on consumer price inflation may also attract some attention on Wednesday, while traders are also likely to keep an eye on the latest developments in Washington.

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