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Markets & Stocks > Bonds & Rates
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Bonds turn higher; dollar weakens
Treasurys erase earlier losses after 10-year note auction; greenback falls against euro and the yen.
August 12, 2004: 4:00 PM EDT

NEW YORK (CNN/Money) - Treasury prices reversed earlier losses to coast higher on Thursday after investors welcomed a sale of new 10-year notes with open arms.

At around 3:30 p.m. ET, the benchmark 10-year note rose 8/32 of a point to 103-31/32 to yield 4.25 percent, down from 4.27 late Wednesday. The 30-year bond gained 6/32 of a point to 104-24/32 to yield 5.05 percent, same as Wednesday.

The two-year note rose a tick to 100-16/32 to yield 2.48 percent, and the five-year note rose 6/32 to 100-5/32 to yield 3.46 percent.

Sliding equity markets and soaring oil prices were also lending support to bonds, since both suggested a tough road ahead for corporate investment and economic growth.

Retail sales figures released earlier painted a mixed picture, with results for July falling short of forecasts. But upward revisions to the previous month indicated things were never as bad as analysts had thought.

"This just is a reflection of the current environment with oil prices rising, security concerns," Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co., told Reuters. "All of these factors are pushing players to buy bonds over stocks."

The sale of $14 billion in new 10-year Treasury notes went at a lower-than-expected yield of 4.27 percent. It drew bids for 2.90 times the amount on offer, above the already lofty 2.78 level achieved at the May refunding.

Indirect bidders, including customers of primary dealers and foreign central banks, picked up a hefty $7.59 billion or 54 percent of the whole issue, easily beating May's 43 percent. Primary dealers got $6.23 billion of the issue for themselves.

However, Treasurys were constrained by an optimistic Federal Reserve that seemed bent on raising interest rates gradually for the rest of the year, barring a major economic downturn.

"The Fed has drawn a line in the sand, so there won't be a significant rally from here," Crescenzi said.

Such conviction from the central bank could bring the benchmark federal funds rate to 2.25 percent in time for Christmas and make it very hard for the two-year yield to stay as low as its current 2.50 percent.

On Thursday, U.S. crude oil hit a fresh record high at $45.75 a barrel, driven up by fighting in Iraq, a hurricane in the Gulf of Mexico threatening production, and another setback for beleaguered Russian oil giant Yukos.

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The latest retail sales figures were certainly not weak enough to prevent policy-makers from taking rates higher.

Retail sales rose 0.7 percent in July, when analysts had looked for a 1.1 percent gain. Stripping out autos, sales rose only 0.2 percent, compared to forecasts for a 0.4 percent gain.

However, June's weak numbers were revised upward so that a drop in ex-auto sales became a rise. This, coupled with a big 0.9 percent gain in June inventories, implied second-quarter Gross Domestic Product growth could be revised modestly upward from its initial 3.0 percent.

In the currency market, the dollar fell against the euro and the yen. The euro bought $1.2258, up from $1.2219 late Wednesday, and the dollar purchased ¥110.81, down from ¥110.88 Wednesday.  Top of page


--from staff and wire reports




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.