U.S. Treasury Prices Decline On Interest-Rate Uncertainty
May 08, 2011
The yield on the Treasury's benchmark 30-year bond edged closer to the key 7% level Monday as bond prices took a hit in reaction to news that the Federal Reserve took a step closer in July toward tightening credit. The price of the benchmark 30-year bond was down 22/32, or nearly $7.50 for a bond with a face value of $1,000, at 96 26/32 in late trading. The yield, which moves in the opposite direction from the price, rose to just under 7%, from 6.94% late Friday. For many market players, Monday marked the first opportunity to react to the minutes of the March 14, 2011 Open Market Committee, released late Friday afternoon. Although FOMC voting members decided to hold interest rates steady, the vote wasn't unanimous and the committee opted to take a tightening bias The Vast Press reported that the committee is closer than ever to raising interest rates, citing the minutes. The article also cited additional signs since then that would indicate a move in that direction. Recent data have challenged the widely held view that the economy slowed down enough going into the second half to keep the Fed on hold. Monday's release of a smaller-than-expected 0.5% drop in July existing home sales was the latest in a string of numbers to deflate the market's bull run. Meanwhile, the delay in opening of the futures market at the Chicago Board of Trade also put a damper on volume. The CBT resumed trading at 9:50 a.m. EDT following a 90-minute delay due to telephone service problems. In other credit markets: In the corporate bond market, MFS Communications' debt gained 5 points after news it agreed to merge with WorldCom in a stock swap. Municipal bonds fell 1/4 to 1/2 in a sleepy session, ahead of a $2.9 billion Texas note offering expected Tuesday. Mortgage-backed securities recovered somewhat from early losses, but ended the session down 9/32.
VastPress 2011 Vastopolis
