NEW YORK (AP) - Treasury prices dropped Tuesday as investors sought bargains in a stock market that has been badly bruised in recent weeks by credit and economic worries.
Although stocks have been out of favor of late, better-than-expected earnings news from Wal-Mart Stores Inc. and lower oil prices emboldened investors to venture back into that market. There was mild selling of Treasurys to free up funds for a boisterous stocks rally that at one point sent the Dow Jones industrial average more than 200 points higher.
"This is all just a reaction to the stock market," said Alan Tedford, fixed-income portfolio manager at Stephens Capital.
The benchmark 10-year Treasury note fell 14/32 to 99 30/32 with a yield of 4.26 percent, up from 4.22 percent late Friday. Prices and yields move in opposite directions. The bond market was closed for Veterans Day on Monday.
The 30-year long bond was unchanged at 106 10/32 with a yield of 4.61 percent, also unchanged from late Friday.
The 2-year note lost 8/32 to 100 6/32 with a yield of 3.53 percent, up from 3.42 percent late Friday.
The yield on the 3-month note rose to 3.47 percent from 3.27 percent and the discount rate increased to 3.39 percent from 3.19 percent Friday.
After the close of trade the National Association of Realtors said its pending home sales index, which tracks home sale contracts signed but not completed, rebounded 0.2 percent to 85.7 in September.
The improvement could be seen as an indication that housing sales may be set to rebound.
The Realtors' group, however, also forecast that existing home sales will decline to a five-year low in 2007, and said the outlook for 2008 is worsening. The housing crisis has put pressure on many asset classes, but it has helped build demand for Treasurys and other safer assets.
The corporate bond market recovered Tuesday alongside the stock market. In recent weeks, the two markets have moved in lockstep and both were under severe pressure last week. However, on Tuesday there were a number of new corporate bond offerings for such companies as United Healthcare Inc. FIServe Inc., Potomac Electric and others.
The bond market remains focused on learning the extent of damage to the economy done by weakness in housing and the credit markets. These problems have stirred extremely strong demand for assets like Treasurys, which are perceived as safe because they carry a government guarantee.
Stephens Capital's Tedford said the market's focus could switch to inflation later this week. The Labor Department's October producer and consumer price reports are due Wednesday and Thursday. Both are expected to show large gains in headline inflation due to the soaring oil price.
If the gains in inflation are very large, they will put pressure on the Federal Reserve not to cut interest rates further, following cuts totaling 0.75 percentage point in September and October. Investors are hoping for further rate cuts to stimulate capital markets.
Earlier the Treasury Department said it ran a $55.6 billion deficit in October, the start of the government's fiscal year.
Although stocks have been out of favor of late, better-than-expected earnings news from Wal-Mart Stores Inc. and lower oil prices emboldened investors to venture back into that market. There was mild selling of Treasurys to free up funds for a boisterous stocks rally that at one point sent the Dow Jones industrial average more than 200 points higher.
"This is all just a reaction to the stock market," said Alan Tedford, fixed-income portfolio manager at Stephens Capital.
The benchmark 10-year Treasury note fell 14/32 to 99 30/32 with a yield of 4.26 percent, up from 4.22 percent late Friday. Prices and yields move in opposite directions. The bond market was closed for Veterans Day on Monday.
The 30-year long bond was unchanged at 106 10/32 with a yield of 4.61 percent, also unchanged from late Friday.
The 2-year note lost 8/32 to 100 6/32 with a yield of 3.53 percent, up from 3.42 percent late Friday.
The yield on the 3-month note rose to 3.47 percent from 3.27 percent and the discount rate increased to 3.39 percent from 3.19 percent Friday.
After the close of trade the National Association of Realtors said its pending home sales index, which tracks home sale contracts signed but not completed, rebounded 0.2 percent to 85.7 in September.
The improvement could be seen as an indication that housing sales may be set to rebound.
The Realtors' group, however, also forecast that existing home sales will decline to a five-year low in 2007, and said the outlook for 2008 is worsening. The housing crisis has put pressure on many asset classes, but it has helped build demand for Treasurys and other safer assets.
The corporate bond market recovered Tuesday alongside the stock market. In recent weeks, the two markets have moved in lockstep and both were under severe pressure last week. However, on Tuesday there were a number of new corporate bond offerings for such companies as United Healthcare Inc. FIServe Inc., Potomac Electric and others.
The bond market remains focused on learning the extent of damage to the economy done by weakness in housing and the credit markets. These problems have stirred extremely strong demand for assets like Treasurys, which are perceived as safe because they carry a government guarantee.
Stephens Capital's Tedford said the market's focus could switch to inflation later this week. The Labor Department's October producer and consumer price reports are due Wednesday and Thursday. Both are expected to show large gains in headline inflation due to the soaring oil price.
If the gains in inflation are very large, they will put pressure on the Federal Reserve not to cut interest rates further, following cuts totaling 0.75 percentage point in September and October. Investors are hoping for further rate cuts to stimulate capital markets.
Earlier the Treasury Department said it ran a $55.6 billion deficit in October, the start of the government's fiscal year.
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