NEW YORK (CNNfn) - Treasury securities fell sharply Monday as investors bet that last week's stock market rout, which erased trillions of dollars in paper wealth, will not keep the Federal Reserve from raising interest rates in the months ahead.|
Analysts also said the losses came as money fled government debt for U.S. stocks, which rose for the first time in six trading sessions in a move that suggests the worst may be over for struggling equities.
Just before 3 p.m. ET, the price of 30-year Treasury bonds plunged 1-26/32 to 104-22/32. The yield, which moves inversely to price, rose to 5.91 percent from 5.78 percent late Friday. The price of the 10-year note shed 1 to 103-21/32, its yield rising to 5.98 percent from 5.88 percent.
Analysts said a speech by Federal Reserve President Robert Parry, a voting member of the Fed's Open Market Committee, jolted the market by indicating that central bank inflation fighters will continue to tighten credit to slow the economy and preempt rising prices.
"They are continuing to reinforce the point that regardless, with the stock markets down, they are going to continue to raise rates," said Tony Crescenzi, bond strategist at Miller Tabak, & Co.
Crescenzi said about $2 trillion in wealth was lost in Last week's stock sell-off. But that doesn't appear to keep the fed, the nations' central bank, from raising interest rates for the sixth time in nearly a year next month.
"It's risky just to sit back and wait for inflation to show up before we do something," Parry said in prepared remarks to an audience in San Francisco. "One point arguing for monetary restraint is that we seem to have reached a stage where inflation is no longer falling."
Monday's rising stock market also hurt bonds, which often gain when stock investors facing losses move money into the relative safety of government securities.
"We are continuing to take our cues from the stock markets," Mike Ryan, senior bond analyst at Paine Webber, told CNNfn's Before Hours.
Monday held no significant economic indicators. But Tuesday brings housing starts and building permits data for March. Figures on the nation's February trade balance come Wednesday.
The dollar edged lower against the yen Monday after officials from the Group of Seven nations failed to express concern over the recent run-up in the Japanese currency.
In their meeting held last weekend in Washington, D.C., the G7 made the unusual move of saying nothing about the yen.
"The G7 has historically mentioned concern about a strong yen," said Bruce Alston, who manages $1.5 billion in bonds for Value Line Asset Management. "That particular issue was not addressed."
That was enough to bolster the currency, with the dollar just before 3:15 p.m. ET, falling to 1.4.28 yen, off 0.60 percent from Friday's 104.40.
Economists fret that a strong yen, by making it tougher for the island nation to export its goods, could derail Japan's fragile economic recovery.
But despite these fears, traders have bid up the yen, betting that Japan's worst days of recession are behind it.
"Since there was no expression of concern at the yen's strength, traders interpreted this as a green light to resume their yen buying," said Alex Beuzelin, market analyst at Ruesch International
Meanwhile, the dollar rose against the euro. The regional currency fell to 95.34 cents from 96.84 cents Friday.