Finance and Forex Trading Forum

AP / JOE BEL BRUNO, AP Bu · Guest

NEW YORK (AP) -- Treasurys extended their rally into a second
day Thursday, as the soaring price of oil and concerns about a
resulting slowdown in consumer spending drove investors to the
security of government issues.
"Right now it is all about safe haven bets," said Tom di
Galoma, head of Treasurys trading at Jefferies & Co. "There's still
fear in the market about a recession, and that's made stocks pretty
soft this week."
The price of oil swept past $124 a barrel Thursday for the
first time, and expectations are that oil will keep climbing. That
has investors, particularly in the stock market, worried that
consumers will be forced to curtail their spending on discretionary
items, a trend that would likely stymie economic growth.
Such concerns have sent stock prices sharply lower this
week, although equities managed a moderate rebound Thursday.
The nation's major retailers underscored the belief that
consumers are anxious about spending, releasing April sales reports
that showed Americans are being drawn to lower-priced retailers and
that they're spending more on necessities than on apparel and other
discretionary goods.
Meanwhile, the Labor Department said the number of newly
laid off workers seeking unemployment benefits dropped by 18,000
last week to 365,000, a larger decline than expected. The news had
little impact on bond trading.
The yield on the benchmark 10-year Treasury fell to 3.79
percent in its first day of trading, according to BGCantor Market
Data. The Treasury Department on Wednesday auctioned $15 billion of
10-year bonds, the biggest amount in four years; on Wednesday the
benchmark 10-year note had a yield of 3.85 percent.
The 2-year note added 5/32 to 99 26/32 and yielded 2.22
percent, down from 2.30 percent late Wednesday.
Higher oil prices raise the specter of accelerating
inflation, which normal would send bonds falling because of the
negative effect inflation has on fixed-income investments. But
analysts said investors were more concerned about finding a safe
haven than they were about higher prices eroding the value of their
holdings.
The 30-year long bond rose 30/32 to 97 6/32 and yielded 4.55
percent, down from 4.61 percent late Wednesday. Demand increased in
the long bond after the Treasury sold $6 billion of the maturity on
Thursday afternoon.
In late trading, the 10-year yield dipped to 3.78 percent,
the 30-year fell to 4.54 percent, and the 2-year was unchanged.
The 3-month Treasury bill was 1.66 percent from, down from
1.68 percent late Wednesday, and the discount rate was at 2.25
percent, up from 1.81 percent.
Di Galoma said Treasurys also moved higher because of
tensions between Russia and Georgia. Georgian President Mikhail
Saakashvili told Russian journalists Thursday the countries have
come close to war in recent days and a threat of an armed conflict
remains, according to several news reports.
"That's making people nervous, and the Treasury market has
seen an uptick because of it," he said.