2016.12.2815:20:00UTC+00Treasuries Close Firmly Positive Following Five-Year Note Auction

Following the pullback seen in the previous session, treasuries moved notably higher over the course of the trading day on Wednesday.

Bond prices saw modest strength in morning trading before accelerating to the upside in the afternoon. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 5.7 basis points to 2.506 percent.

The early strength among treasuries was partly due to the release of disappointing housing data, with a report from the National Association of Realtors unexpectedly showing a sharp pullback in U.S. pending home sales in November.

NAR said its pending home sales index tumbled by 2.5 percent to 107.3 in November after inching up by 0.1 percent to a revised 110.0 in October.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The steep drop in pending home sales came as a surprise to economists, who had expected pending sales to climb by 0.5 percent.

With the unexpected decrease, the pending home sales index plunged to its lowest level since hitting 105.4 in January.

Treasuries saw further upside following the release of the results of the Treasury Department's auction of $34 billion worth of five-year notes, which attracted above average demand.

The five-year note auction drew a high yield of 2.057 percent and a bid-to-cover ratio of 2.72, while the ten previous five-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 Thursday may be impacted by reaction to the weekly jobless claims report, with jobless claims expected to pull back to 262,000 in the week ended December 24th after jumping to a six-month high of 275,000 in the previous week.

The Treasury Department is also due to finish off this week's series of long-term securities auctions with the sale of $28 billion worth of seven-year notes.