NEW YORK (CNN/Money) -
Treasury prices fell for a second straight session Wednesday after the government revised the broadest measure of economic activity higher and an influential bond manager called for investors to take some profits from the recent bond rally.
Bonds were also hurt by a pullback in oil prices, which followed news that U.S. crude stocks had risen more than expected in the latest week. Rising energy costs have been seen as more of drag on the economy than a precursor of inflation, and they have tended to benefit fixed-income debt.
At around 3:30 p.m. ET, the benchmark 10-year note lost 22/32 of a point at 101-8/32 to yield 4.09 percent, up from 4.02 percent late Tuesday. The 30-year bond shed 1-3/32 in price to 107-18/32 with a yield of 4.86 percent, up from late Tuesday's 4.77 percent.
The two-year note dropped 5/32 to 99-18/32 to yield 2.61 percent, and the five-year note fell 13/32 of a point to 100-2/32 to yield 3.36 percent. Bond yields and prices move in opposite directions.
A call by PIMCO portfolio manager Bill Gross to take some profits also pressured bonds Wednesday.
In his monthly statement released on the PIMCO Web site, Gross said "if those [people] are holders of government bonds based upon a benign outlook for inflation, they had better cash some of them in, especially at today's 4.0% yield for 10-year Treasuries."
Other economists also seemed to confirm that outlook.
Sellers were also given an extra excuse to sell after gross domestic product (GDP) growth was revised up to an annual 3.3 percent from the preliminary reading of 2.8 percent. Much of the change was due to a smaller drag from trade and a larger contribution from inventories.
"I wouldn't make a lot out of those figures," Cary Leahey, senior U.S. economist at Deutsche Bank Securities, told Reuters.
"The important number was that consumer spending is still well below 2.0 percent. But that's an historical artifact, because the arithmetic of the third quarter already suggests that you have a bounce-back of above 3 percent, which is all the market cares about," he added. Consumption grew at just 1.1 percent in the second quarter.
The Treasury market, however, was vulnerable to any good news on the economy, having driven yields to six-month lows on speculation the growth outlook would become uncertain enough to slow the pace of Federal Reserve rate hikes.
For their part, Fed officials have stayed doggedly upbeat on the economy. Late on Tuesday, Kansas City Fed chief Thomas Hoenig predicted GDP growth of 3.5 percent to 4.0 percent for the next year to 18 months. He played down fears that high oil prices would derail the U.S. economic expansion.
In the currency market, the dollar fell against the euro and the yen. The euro bought $1.2330, up from $1.2316 late Tuesday, and the dollar bought ¥110.90, down from ¥111.38 late Tuesday.
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