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NEW YORK (CNN/Money) -
Treasury bond prices rose Tuesday after a government report indicated that inflation has stabilized for now; but the stock market took a beating while the dollar edged higher on the euro and the yen.
The 10-year Treasury note climbed 11/32 of a point to 100-30/32 to yield 4.13 percent, down from 4.18 late Monday, while the 30-year note rose 16/32 of a point to 114-17/32 to yield 4.41 percent, down from 4.45. Bond prices and yields move in opposite directions.
The two-year note gained two ticks to yield 3.87 percent, while the five-year note gained 7/32 to yield 3.92 percent.
The Producer Price Index report, a closely watched inflation indicator that measures prices at the wholesale level, rose 0.6 percent in August, compared with a 1 percent increase in July. Economists surveyed by Briefing had forecast a 0.7 percent boost in August.
The so-called core PI, which excludes food and energy costs, also came in weaker than expected, indicating that inflationary pressures are in check for now.
Bond investors fear inflation, since it erodes the value of their fixed-income investments.
But many analysts fear that inflation will jump in the aftermath of Katrina, which has driven up energy prices and may push prices on several construction materials higher to meet a jump in housing demand and infrastructure rebuilding needs.
Moreover, interest rate futures for the Sept. 20 meeting still show an 82 percent chance that the Fed will raise rates.
A stock decline also boosted fixed-income investments, as stock investors took profits after a two-week rally on discouraging corporate news and worries about the impact of Hurricane Katrina on the economy.
In currency trading, the euro bought $1.2264, down slightly from $1.2284 late Monday. The dollar bought ¥110.67, up from ¥110.38.
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