Bonds take a break from rally
Treasurys remain higher, but retreat from early gains on Fed official comments and late jump in commodity prices; dollar weakens.

NEW YORK ( - The Treasury bond rally slowed its pace Monday as a late jump in commodity prices and hawkish comments by a Federal Reserve official outweighed a weak performance on Wall Street.

The dollar fell against the euro and the yen.

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The 10-year Treasury note climbed 5/32 to 100-20/32 to yield 5.04 percent, down from 5.06 percent on Friday afternoon. The yield on the benchmark fell to its lowest level in a month Monday, briefly dipping below 5 percent.

The 30-year bond climbed 4/32 to 90-12/32, yielding 5.13, unchanged from late Friday. Bond prices and yields move in opposite directions.

The five-year note added 3/32 to yield 4.94, while the two-year note added one tick to yield 4.95.

With no major economic guidance, Treasurys lured in investors after global markets stumbled on fears that rising rates and energy prices would spark a slowdown in economic growth worldwide.

Early declines in commodity prices also prompted investors to move into bonds as they sought a safe haven investment, but a late rally in gold and oil helped pare early session gains.

Comments by Dallas Federal Reserve Bank President Richard Fisher also weighed on Treasury prices after he said that inflation is "running too high for comfort." (Full story)

"Overall the tone appears a bit hawkish from Fisher," strategists at Action Economists told Reuters. "Yields have bounced from lows on the tone of the remarks."

Treasury investors, who fear inflation since it erodes the value of the fixed-income investment, have been looking for clues about inflation pressures in an effort to determine whether the Federal Reserve will keep raising interest rates.

The runup in Treasury prices, particularly longer-dated debt, has put the 10-year yield near 5 percent, flattening the bond market's "yield curve," meaning some issues with shorter maturities are yielding almost as much as longer maturities. The yield curve was inverted for part of last winter and then reverted to a more normal upward slope in the spring.

In the past an inverted curve has signaled a recession, though economists say it's less of a reliable indicator than it once was. Most economists are forecasting slower economic growth in the second half of the year.

Investors have few economic indicators this week until Wednesday when news on durable goods and new home sales is due out.

In currency trading, the dollar slipped against the euro and the yen.

The euro bought $1.2868 up from $1.277 in late Friday trading. The dollar bought 111.56, down from 111.73 in the previous session.


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