|
Bonds drop as Dow jumps
|
 |
February 28, 2000: 3:14 p.m. ET
Strength in blue chip stocks, abundance in corporate supply weigh down Treasurys
By Staff Writer Jill Bebar
|
NEW YORK (CNNfn) - Treasury bonds ended lower Monday, as investors plowed earnings from fixed-income securities into more profit-generating trades, capitalizing on a rebound in the Dow Jones industrial average.
"The stock market is the main theme," said Tony Crescenzi, senior market strategist at Miller, Tabak & Co. "Strength in big caps, particularly the Dow, is the source of weakness in the bond market."
At around 2:45 p.m. ET, the 30-year bond fell 20/32 to 100-25/32. Its yield, which moves inversely to its price, rose to 6.19 percent from 6.14 percent Friday. The 10-year Treasury note dropped 17/32 to 100-19/32, its yield rising to 6.41 percent from 6.34 percent Friday.
A heavy corporate issuance calendar this week also weighed on Treasurys. The corporate bond supply is seen as attractive, since their higher yield could draw investors from Treasurys.
Treasurys falter
Bond market participants continued to take cues from the equities markets, with strength in blue chip stocks contributing to losses. The Dow Jones industrial average surged over 2 percent in late trade Monday, holding steady above the psychologically significant 10,000 level.
Last week, Treasurys benefited from flight-to-quality flows as investors turned to the relative safety of government fixed income securities.
In economic news, U.S. personal income rose 0.7 percent in January and spending rose 0.5 percent, the Commerce Department reported Monday. Personal income was in line with expectations, while spending was slightly higher than forecasts.
Investors largely ignored the numbers, focusing on key data scheduled later this week, including Wednesday's National Association of Purchasing Managers' (NAPM) report and Friday's employment report. Analysts surveyed by briefing.com forecast 235,000 new non-farm jobs were created in February against 387,000 in January.
With continued strength in the U.S. economy, analysts said any sign of inflation in these reports could have a negative impact on bonds. The Federal Reserve meets on March 21 to determine interest rates, and there is widespread belief they will hike rates by a quarter percentage point. The central bank increased short-term interest rates four times since last June in an effort to control inflation.
(Click here for a look at briefing.com's economic calendar.)
Euro weakness
One positive for Treasurys was a weak euro. The euro slumped nearly 4% overnight, hitting a lifetime low at 93.90 cents against the dollar. A strong dollar boosts U.S. Treasurys because it enhances the value of U.S. dollar assets.
Marc Chandler, chief currency strategist at Mellon Bank, told CNNfn's Ahead of the Curve, the euro's decline was a "healthy sign." (176.4K WAV) (176.4K AIFF)
 At around 2:45 p.m. ET, the euro was at 97.03 cents, down from 97.41 Friday, a 0.39 percent gain in the dollar's value.
However, the dollar traded at 109.22 yen, down from 110.28 yen Friday, nearly a 1 percent loss in the dollar's value.
Buyback speculation
Analysts said speculation continued about the U.S. Treasury's buyback program. In late January, the Treasury Department, faced with a budget surplus, announced plans to reduce the issuance of long-term debt. Bonds performed well following the announcement. Miller Tabak's Crescenzi said there was no definitive time on when the Treasury would announce details of the program. 
|
|
|
|
|
 |
|
