|
|
|
|
|
|
|
|
| The Senate hearing awaits
|
|
|
|
|
NEW YORK (CNN/Money) -
Bonds lost ground Friday after a report showing economic strength in the third quarter sent stocks higher and renewed expectations for the Fed to stay on track with its rate-hiking campaign.
The dollar gained.
The benchmark 10-year note lost 5/32 to 97-15/32 to yield 4.57 percent, up from 4.56 late Thursday. The 30-year bond fell 4/32 to 108-25/32 to yield 4.77 percent, relatively unchanged from the previous session. Bond prices and yields move in opposite directions.
In shorter-dated debt, the two-year declined two ticks, yielding 4.38 percent, while the five-year note lost 4/32 to yield 4.45 percent.
The Commerce Department said Friday that the U.S. economy grew at a faster-than expected pace of 3.8 percent in the third quarter, despite suffering through hurricanes Katrina and Rita and soaring energy prices. Wall Street had predicted GDP would climb 3.6 percent during the third quarter, which stretches from July to September.
The Gross Domestic Product report also showed that so-called core inflation, which excludes often volatile food and energy costs, fell in the third quarter.
Bonds ticked higher Friday morning as the inflation reading outweighed the signs of economic growth. Many investors have expected high energy prices to result in higher prices for consumer goods, a primary concern recently for officials at the Federal Reserve, whose policy makers have been raising short-term interest rates in a bid to ward off inflation.
But Treasury prices turned around later in the session as investors focused more on GDP growth rather than the core inflation reading. Stocks, which rallied Friday, also weighed on bond prices. The Dow Jones Industrial Average added about 170 points, or 1.6 percent, to end three consecutive days of declines.
Bond yields have been rising the past few weeks, with the yield on the benchmark 10-year note hitting a seven-month high on Wednesday, as the Fed has signaled it is committed to its rate-hiking campaign. Bond prices tend to fall when interest rates increase as rising rates make newer, higher-interest paying investments more attractive.
Treasury prices found some support Thursday after Bill Gross, managing director of the nation's largest bond fund, said Fed chair nominee Ben Bernanke would be good for keeping bond yields low and predicted that Bernanke would stop hiking interest rates early next year.
But by Friday that positive sentiment had faded as investors looked to the Fed's next meeting on Tuesday. The Fed has raised rates 11 straight times since last June, bringing the fed funds rate to 3.75 percent.
In currency trading, the dollar gained as the euro bought $1.2066, down from $1.2138 late Thursday, while the dollar bought ¥115.68, up from ¥115.47 in the previous session.
-- from staff and wire reports
_________________
For bond charts, click here.
|
