Bonds fall on Fed official comments, dollar weakness
Hawkish comments from Chicago Fed president Moskow weigh on Treasurys as does declining dollar.
NEW YORK (CNNMoney.com) - Bond prices fell Tuesday following inflation comments by Chicago Fed President Michael Moskow and signs of weakness in the dollar.
In bond markets, the benchmark 10-year note fell 7/32 to 100-11/32 to yield 5.08 percent, up from 5.06 percent Friday.
The 30-year bond slipped 11/32 to 89-21/32, yielding 5.18 percent, up from 5.17 percent the previous session. Bond prices and yields move in opposite directions.
The five-year note fell 4/32 to yield 4.98 percent, while the two-year note slipped on tick, yielding 4.97 percent.
Treasury prices slipped after Chicago Fed President Michael Moskow said that inflation was high enough to warrant close attention, fueling lingering inflation fears by bond traders.
"We know the dangers of inflation getting built into the economy. We know that inflation can have a great deal of inertia and we have to be very diligent and very careful to make sure that doesn't happen," Moskow said in a televised interview Tuesday.
Bond investors fears inflation since it erodes the value of the fixed-income paying investment.
Investors also backed away from the U.S. currency-based Treasurys after the dollar posted its biggest one-day fall against the euro in six weeks, and slipped against the yen.
The euro bought $1.2869, up from $1.2750 in New York on Friday. The dollar bought ¥112.17, down from ¥112.40 in the previous session.
"You have a number of things working together to weigh on Treasuries here and the dollar getting battered is quite a big part of it," Beth Malloy, bond market analyst with research company Briefing.com in Chicago told Reuters.
The Conference Board also reported that U.S. consumer confidence fell to its lowest level since after last year's hurricanes in May, but did not slip as far as some economists had predicted.
Treasury investors largely overlooked President Bush announced Henry Paulson as his choice to succeed current Treasury Secretary John Snow.
Investors are eagerly awaiting Friday's employment report for May in an effort to determine whether the Federal Reserve will continue with its rate-hike campaign. Economists polled by Briefing.com are anticipating nonfarm payrolls to increase to 170,000 from the April reading of 138,000, and the unemployment rate to hold steady at 4.7 percent.
-- From staff and wire reports.
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