NEW YORK (CNNfn) - Treasury bonds rose Monday in what analysts called an expected rebound following two weeks of steady losses.
Just before 3:20 p.m. ET, the price of the benchmark 30-year Treasury bond gained 11/32 to 95-19/32. Its yield, which moves inversely to its price, fell to 6.45 percent from a 27-month high of 6.47 percent Thursday.
With fears of Federal Reserve interest rate hikes having prompted a two-week-long bond sell-off, most analysts expected some rebound eventually.
"The market is pretty oversold,” said Dennis Hynes, chief market strategist at R.W. Pressprich. "You’ll see the market catch a bid here.”
Still, most see bond yields rising before falling in the month ahead as the Fed enters a much-forecast credit tightening cycle next year. Last week the Fed, worried that a rate hike could disrupt the markets ahead of the change to 2000, held its main lending rate steady at 5.50 percent. But in its statement, the central bank warned that the ever-strengthening economy could lead to a pickup in inflation, mandating rate hikes ahead.
In a note to clients Monday, Donaldson Lufkin & Jenrette forecast two and possibly three rate hikes next year. As such, DLJ sees the yield on the 30-year Treasury bond rising to 6.85 percent by the end of 2000.
The Fed, the nation’s central bank, has hiked interest rates three times since June. But the moves have had little apparent effect on slowing the economy. That’s certainly the case in the stock market, which continues to set records. The rise in equities has created trillions of dollars in paper wealth that economists say fuels a surge in consumer spending. Consumer confidence, meanwhile, remains high and the unemployment rate of 4.1 percent is near a 30-year low.
Dollar mixed
The dollar edged lower against the yen Monday and was little changed versus the euro.
Just before 3:20 p.m. ET, the dollar fell to 102.30 yen from 102.79 Friday, a 0.46 percent drop in the dollar’s value.
The dollar’s fall Monday gives back about half of the U.S currency’s gains from Friday, when the Bank of Japan bought dollars and sold yen in an effort to temper its resurgent currency and keep the Asian nation’s fragile economic recovery on track.
"The market will be cautious about pushing the yen too high as the BOJ's intervention remains a risk, and even though the intervention was ineffective,” said Marc Chandler, currency strategist at Mellon Bank.
Officials fret that a strengthening yen, because it makes exports more expensive, will curb Japan’s economic recovery.
Still, Japan produced more evidence of an economic upturn Monday as industrial output rose in November, shrugging off the effects of the recent rise in the yen.
The yen’s gains come as investors pour money into Japanese stocks, which must be bought in local currency.
"Year-end institutional interest in Japanese assets continued to fuel traders' demand for yen,” Ruesch International said in a note to clients Monday.
The euro, meanwhile, was little changed against the dollar. It cost $1.0131 to buy one euro, up from $1.0127 Friday. 
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