Finance and Forex Trading Forum

AP / JOE BEL BRUNO, AP Bu · Guest

NEW YORK (AP) -- Treasury bond prices reversed course
Tuesday, with investors pulling money out of government bonds to
participate in a moderate rally in stocks.
Demand for the safety of government debt waned as investors
grew confident that the economy and corporate earnings are heading
toward a broad recovery. Treasurys had spiked earlier in the session
when major indexes pulled back on fear the credit crisis that ripped
through global markets would be prolonged.
Investors were able to look past disappointing results from
Fannie Mae and Swiss bank UBS AG, which both showed continued
troubles from the financial market turmoil. Wall Street also was
able to overlook a spike in crude oil prices, which climbed past
$122 a barrel on the New York Mercantile Exchange.
The zigzag movement of the bond and stock markets was to be
expected as investors look to place bets about the economy's future.
Tuesday's session only underscored that investors remain skittish as
markets remain volatile.
"You can't expect there to be a straight line forward," said
Stephen Stanley, chief economist for fixed-income firm RBS Greenwich
Capital. "Market sentiment tends to swing in a really manic way ...
each time something bad happens it feels like a setback."
Stanley said this will be a "long-term process" before both
the bond and stock markets get back to normal.
The benchmark 10-year Treasury fell 8/32 to 96 25/32 and
yielded 3.90 percent, up from 3.87 percent late Monday, according to
BGCantor Market Data. Prices and yields move in opposite directions.
Meanwhile, the 30-year long bond fell 18/32 to 95 22/32 and
yielded 4.64 percent, up from 4.60 percent late Monday.
The 2-year note rose 2/32 to 99 17/32 and yielded 2.37
percent, down from 2.43 percent late Monday. The yield on the 2-year
note has risen in recent weeks as economists speculated that the
Federal Reserve was nearly done with its cycle of interest rate
cuts. Policymakers cut the fed funds by a quarter point last week.
In late trading, the 10-year yield rose to 3.92 percent, the
30-year yield rose to 4.67 percent and the 2-year yield rose to 2.39
percent.
The 3-month Treasury bill yielded 1.63 percent, up from 1.61
percent late Monday, and the discount rate was at 1.60 percent, up
from 1.58 percent.
Fixed-income investors also positioned their portfolios
ahead of the Treasury Department's quarterly sales of long-term
debt. The government is expected to sell $15 billion of 10-year
notes on Wednesday, and $6 billion of 30-year bonds the following
day.
Earlier in the session, fears that the credit crisis will
continue prompted many investors to take money out of the stock
market in favor of Treasurys.
Fannie Mae posted a $2.2 billion loss in the first quarter
and warned of severe weakness in 2008. The largest buyer of
mortgages in the U.S. said American home owners were having a hard
time making their payments as the housing slump continues.
Meanwhile, UBS posted a quarterly loss and said it plans to
cut 5,500 jobs. The Swiss bank also said it sold billions of dollars
of subprime assets to shore up its balance sheet, and warned that
conditions in the financial markets were still tough.