|
NEW YORK (CNN/Money) -
Treasury prices fell and the dollar rose Monday as bond dealers shrugged off downbeat economic reports in the face of a rising interest-rate outlook.
The 10-year bond fell 4/32 of a point to 98-1/32 to yield 4.49 percent, up slightly from 4.48 late Friday. The 30-year bond lost 5/32 of a point to 109-22/32 to yield 4.71 percent, up from 4.70 in the previous session. Bond prices and yields move in opposite directions.
In shorter-dated debt, the five-year note dropped 3/32 of a point to yield 4.35 percent, while the two-year note edged one tick lower, yielding 4.27 percent.
The market slipped lower in the afternoon on growing perceptions that inflation is a greater risk for the economy than slower growth, and that the Federal Reserve will act to contain inflation.
"We expect the combination of solid economic growth and higher inflation risks to push the Fed to raise rates higher than is implied by prevailing bond yields," Colin Lundgren, head of institutional fixed income at RiverSource Investments told Reuters.
Recent talk about interest rates tracking higher has been so persistent that late last week Merrill Lynch, one of the last major banks still holding out for a pause in monetary tightening this year, was forced to shift its forecast. They now see the federal funds rate peaking at 4.5 percent, not the 4 percent they had envisioned before.
The interest-rate talk has prevented bonds from rallying on data ordinarily supportive of government debt, including Monday's disappointing New York factory activity report.
The New York Federal Reserve Bank's "Empire State" index showed that overall conditions for manufacturers slipped to 12.08 for October, the lowest level in five months, from September's downwardly revised 15.58.
Bond prices rose immediately after the release, since speculation about an economic slowdown often makes fixed-income bonds look relatively safe when compared with equities. But they could not hold on to gains as inflation fears persisted in the market.
However, longer-dated debt often bears the negative consequences of uncertainty over inflation and interest-rate hikes, with the yield on long bonds rising in order to compensate investors for additional risk they take in loaning their money to the government for a longer time.
In currency trading, the dollar rose against the euro and the yen, with analysts attributing the gain to short-term traders buying the dollar back at cheaper levels following its slide late last week.
The dollar bought ¥114.92, up from ¥113.95 late Friday, while the euro bought $1.2027, down from $1.2086 the previous session.
-------------------
For updated bond charts, click here.
-- from staff and wire reports
|
