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Bond rout continues
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November 15, 2001: 4:03 p.m. ET
Treasury securities, the most pessimistic of investments, suffer tough week.
By Staff Writer Jake Ulick
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NEW YORK (CNN/Money) - The news on the economy is improving. And no one is more upset than bond investors, who watched their securities decline in value for a fifth straight day Thursday.
"Sentiment in the bond market has really soured," said Mike Ryan, senior fixed-income analysts at UBS PaineWebber.
Thursday's selloff sent yields on the benchmark 10-year note, which move inversely to their price, rising to 4.73 percent from 4.31 percent late last week.
Ryan links some of the losses to the bond market's post-Sept. 11 rally, when fears for a deep and long recession sent investors running for the safety of Treasury securities. Instead, recent data on jobless claims, retail sales and consumer confidence showed stability, ramping down expectations for lower interest rates ahead.
Bonds have lost another lift as the United States gains traction against Afghanistan's Taliban.
"It stunned us how things have turned around there," Ryan said of Afghanistan, where some al Qaeda and Taliban leaders were killed in U.S. airstrikes, the Pentagon said. After capturing Kabul, the capital, Northern Alliance rebels have moved southward, gaining more control of the country.
And then there's the stock market, where a two-month run appears more and more sustainable every day.
"Stocks look very cheap to me compared to bonds," Jon Manley, investment strategist at Salomon Smith Barney, told CNNfn's Street Sweep.
Bonds got cheaper Thursday. Just before 3 p.m. ET, the price of the 30-year bond fell 2-27/32 to 102-14/32, yielding 5.21 percent, up from Wednesday's 5.02 percent. Five-year notes were off 30/32 to 97-13/32, the yield rising to 4.07 percent.
The latest economic data showed that the number of Americans filling for first-time jobless claims fell by 8,000 to 444,000 last week. On Wednesday, a report showed a record 7.1 percent gain in October retail sales. And an early read on November consumer confidence posted surprising strength last week.
"Some of the fear is leaving the market as we're moving farther along in the war against terrorism and the economy is not quite as weak as we thought," said Gib Clark, head of government bond trading at Zions Bank Capital Markets in Jersey City, N.J. "It all adds up to higher interest rates."
But the bond market losses mask a great run. The nation's largest bond mutual fund, Pimco Total Return, is up 10.4 percent year-to-date, a period when the Nasdaq is down 23 percent.
The Treasury Department has helped. A decision late last month to stop selling 30-year bonds sent investors scrambling for the security. Yields tumbled to three-year lows.
At the same time, the Federal Reserve cut interest rates for the tenth time this year last week, taking the overnight intra-bank lending rate to 2 percent.
But the focus Thursday was on the tough short-term run for bonds. Tony Crescenzi, bond strategist at Miller Tabak, published a research note titled "nine reasons for bond rout." In it, he linked the slide to the economy's improvement, progress against terrorism, and the falling price of oil.
"The pendulum has swung against the bond market in favor of the economy, stocks, and spread products," Crescenzi said.
But he's not ready to call the end of the bond market's yearlong run.
"The above factors would have to develop further, however, in order for current market trends to persist," Crescenzi said.
In the currency market, the dollar strengthened against the yen and held steady versus the euro. The dollar purchased ¥122.41, up from ¥121.58 at yesterday's close, while the euro trade at 88.81 cents from 88.26 cents Wednesday. 
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