NEW YORK (CNN/Money) -
Bond prices edged lower Thursday after a series of economic reports kept traders on edge about inflation, and despite the government's best 10-year note sale in almost three years.
The dollar rose against the yen and the euro after trading lower late Wednesday.
At about 4:30 PM ET, the benchmark 10-year bond fell 7/32 to 93-14/32 to yield 4.85 percent, just off its two-year high yield of 4.87 percent reached earlier in the session, and up from 4.79 percent late Tuesday.
The 30-year bond fell 15/32 to 97-14/32 to yield 5.56 percent, up from 5.52 on the previous day. Bond prices and yields move in opposite directions.
The five-year note dropped 6/32 of a point to 99-12/32 to yield 4.01 percent; the two-year note, little changed all week, fell 3/32 to yield 2.64 percent.
Economic data pressured Treasury prices by creating more rate hike worries.
April producer prices rose a hefty 0.7 percent, the government said, more than double economists' forecasts for a 0.3 percent increase, though the core reading, which excludes food and energy prices, rose 0.2 percent, as expected.
Bond investors dread inflation, which erodes the value of their investments.
Meanwhile, April retail sales came in softer than expected, but excluding autos they fell only 0.1 percent against forecasts of a 0.2 percent drop.
New weekly jobless claims climbed to 331,000 last week from 318,00 the week before, a bit more than expected.
Traders now anxiously await the consumer price index figures due out Friday, hoping that the numbers will encourage the Fed to hold off on raising interest rates.
Reuters analysts forecast that the core CPI will rise 0.2 percent, saying that anything larger could spark speculation that the Fed will aggressively tighten, hiking rates by as much as half a percentage point in June.
Thursday's auction of $15 billion in new 10-year Treasury notes was the best in nearly three years, selling at a lower-than-expected yield of 4.848 percent and drawing bids for 2.78 times the amount on offer, easily beating February's 2.00 level and the 1.83 average of last year's auctions.
But bonds didn't respond to the news, another sign that interest rate fears are the major sentiment on Wall Street.
In currency trading, the dollar jumped against the euro and the yen as investors looked for higher returns from a possible rate hike in the United States.
The dollar bought ¥114.49, up from ¥113.05 late Wednesday, while the euro bought $1.1813, down from $1.1902 late Wednesday.
A key level to watch if the dollar continues to rise against the yen would be ¥115.78, said Brian Taylor, managing director of foreign exchange trading with Manufacturers and Traders Bank in Buffalo, N.Y., in an interview with Reuters.
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