Finance and Forex Trading Forum

AP / JOE BEL BRUNO, AP Bu · Guest

NEW YORK (AP) -- Treasurys advanced Monday, with investors
again seeking safety in response to a drop in stocks and a big jump
in crude oil prices.
Government debt looked more attractive as crude oil prices
passed $120 a barrel for the first time. Higher oil prices tend to
raise concerns in the bond market about inflation that can erode the
value of fixed-income investments. But Treasurys rose nonetheless as
investors drew money away from Wall Street on concerns that
consumers might cut back spending on discretionary items. The Dow
Jones industrials ended the day down 88.66, or 0.68 percent, at
12,969.54.
An improvement in stock index futures after the close of
trading sent most yields higher, an indication that the two markets
remain closely linked.
Bonds showed little reaction to a key reading on the U.S.
service sector. The Institute for Supply Management said its April
index of nonmanufacturing activity rose to 52 from 49.6 in March. A
reading above 50 signals economic expansion; analysts had expected
the figure would come in at 49.3, according to economists surveyed
by Thomson Financial/IFR.
Investors are looking for data that will help them gauge if
the Federal Reserve is likely to end its cycle of interest rate
cuts; last week, central bankers cut rates by a quarter point, and
gave no indication about their next move. However, many economists
are theorizing the Fed is pausing in its rate cutting campaign.
At the close of regular trading, the benchmark 10-year
Treasury rose 4/32 to 97 7/32 and yielded 3.84 percent, down from
3.86 percent late Friday, according to BGCantor Market Data. Prices
and yields move in opposite directions.
The 30-year long bond fell 9/32 to 96 10/32 and yielded 4.60
percent, up from 4.49 percent late Friday.
The 2-year note rose 2/32 to 99 13/32 and yielded 2.43
percent, down from 2.44 percent late Friday. The gains in government
debt came with markets in Britain and Japan closed for holidays,
which made for a light day of trading.
But in late trading, Treasurys gave up some of their gains
and most yields moved higher. The yield on the 10-year yield rose to
3.87 percent, while the 2-year rose to 2.44 percent. The 30-year
yield was unchanged from regular trading.
The 3-month Treasury bill yielded 1.61 percent, up from 1.51
percent late Friday, and the discount rate was at 1.58 percent, up
from 1.21 percent.
Investors were awaiting Wednesday's auction of $15 billion
of 10-year notes, to be followed by $6 billion of 30-year Treasurys
on Thursday.
Tom Di Galoma, head of Treasurys trading at Jefferies & Co.,
said the focus this week will be on the auctions. He also believes
the market might be at an important point after 2-year notes, which
are the most sensitive to economic news and interest rate changes,
held steady after the government released a better than expected
payroll report on Friday. The Labor Department said 20,000 jobs were
cut last month, compared to expectations for 375,000.
"The bottom line is a successful test of the levels should
rally bonds in the short term," he said.
(This version CORRECTS that 30-year long bond fell instead
of rose.)