2017.05.2315:28:00UTC+00Treasuries Move To The Downside Ahead Of Fed Minutes

After initially moving modestly higher, treasuries came under pressure over the course of the trading session on Tuesday.

Bond prices pulled back firmly into negative territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed by 3.1 basis points to 2.285 percent.

The weakness among treasuries came as traders looked ahead to tomorrow's release of the minutes of the latest Federal Reserve meeting.

The minutes of the meeting held earlier this month may shed some additional light on the outlook for interest rates ahead of the next meeting in mid-June.

The Fed is widely expected to raise interest rates next month, with CME Group's FedWatch tool indicating an 83.1 percent chance of a quarter point rate hike.

Treasuries saw continued weakness following the release of the results of the Treasury Department's auction of $26 billion worth of two-year notes, which attracted above average demand.

The two-year note auction drew a high yield of 1.316 percent and a bid-to-cover ratio of 2.90, while the ten previous two-year note auctions had an average bid-to-cover ratio of 2.68.

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

Meanwhile, traders largely shrugged off a report from the Commerce Department showing a substantial pullback in new home sales in the month of April.

The Commerce Department said new home sales plunged by 11.4 percent to an annual rate of 569,000 in April from an upwardly revised 642,000 in March.

Economists had expected new home sales to drop to a rate of 602,000 from the 621,000 originally reported for the previous month.

The upwardly revised figure for March reflected the highest rate of new home sales since it reached 727,000 in October of 2007.

A report on existing home sales may attract some attention on Wednesday, although trading activity may be subdued ahead of the release of the Fed minutes later in the day.

Bond traders are also likely to keep an eye on the results of the Treasury Department's auction of $34 billion worth of five-year notes.