NEW YORK (CNN/Money) -
Treasury prices rose Monday as investors fled sliding stocks and sought safety in bonds, pushing benchmark yields down to six-week lows.
Concerns over the crash of two Black Hawk helicopters in Iraq, which killed killing 17 soldiers, Saturday, as well as terrorist car-bombing attacks on synagogues in Turkey has investors on edge.
Just before 4 p.m. ET, the benchmark 10-year note gained 7/32 of a point in price to 100-14/32, yielding 4.19 percent, down from 4.22 percent late Friday. The 30-year bond jumped 5/32 of a point to 104-27/32, with a yield of 5.04 percent, down from 5.05 percent Friday.
The two-year note edged 1/32 of a point higher to 99-22/32, yielding 1.78 percent, while the five-year note rose 6/32 of a point to 101-1/32 with a yield of 3.15 percent. Yields move in the opposite direction of bond prices
A round of profit-taking pulled the market back from its best levels, however. Analysts said investors were reluctant to push yields lower as long as evidence points to economic recovery.
"It's a pretty straightforward case of weak equities helping bonds. But there's still the feeling that we're running up against some kind of a brick wall, and that's why prices were unable to push a whole lot higher," Anthony Karydakis, senior financial economist at Banc One Capital Markets, told Reuters.
Karydakis said investors regarded a 75-basis-point spread between the 1.00 percent federal funds rate and the two-year note yield as the minimum cushion necessary "to protect oneself when the name of the game is the beginning of a [monetary] tightening process."
Bonds have shown strength in recent days, despite a batch of better-than-expected economic reports, as the Federal Reserve and experts have reiterated that while interest rates can't stay low forever, the central bank is bound to hold them low for as long as possible.
"There's a strong view that it will be very hard to push two-year yields below 1.75 percent in a significant way without a development that could keep the Federal Reserve from raising interest rates until the end of next year or 2005, so we're stalling a bit," Karydakis said.
At one point on Monday, benchmark 10-year yields hit their lowest levels in six weeks, breaking a major chart barrier around 4.18 percent, as fears of terror attacks contributed to a switch from equities to bonds and other safe havens.
Earlier in the day, the New York Federal Reserve's Empire State Manufacturing Survey of regional manufacturers showed a jump to 41 from a revised 34.1 in October. Economists, on average, had expected the index to slip to 27, according to a survey by Briefing.com.
Meanwhile, the government said business inventories unexpectedly rose 0.3 percent in September as unsold stocks of autos accumulated at the fastest clip since February. Economists had been expecting inventories to remain unchanged, according to Reuters.
The market navigated strong U.S. economic data with little damage, but talk of increased corporate issuance this week, including a reopened 10-year offering from Ford, seemed to tip the scales to profit-taking on recent hefty gains. The gyrations left some observers puzzled.
Dollar mixed on terror concerns
In the currency market, the dollar strengthened against the euro and the Japanese yen. The euro bought $1.1752, down from $1.1782 late Friday, and the dollar bought ¥108.94, up from ¥108.31 Friday.
The dollar scored a 10-day high against the yen Monday, after reports that al Qaeda had threatened U.S. allies, including Japan, causing Japanese financial markets to sell off sharply.
The concerns grew out of the suicide bomb attacks in Istanbul, Turkey, Saturday that killed 23 people. London-based Arab-language newspaper al-Quds al-Arabi said al Qaeda claimed responsibility and was planning car bombings against the United States, Britain, Italy, Australia and Japan.
"I think the market certainly cited the al Qaeda story," Meg Browne, currency strategist at HSBC in New York, told Reuters. "But I think it's more flows and market positions."
-- Reuters contributed to this report.
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