Treasury prices mixed
Prices for U.S. debt fall as investors respond to reports on inflation and industrial production.
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| Click the chart for current bond prices and yields. |
NEW YORK (CNNMoney.com) -- Treasurys were mixed Wednesday as investors responded to reports on inflation and industrial production.
The Consumer Price Index, the Labor Department's key measure of inflation, fell 0.1% in March, and registered its first annual decline since August 1955. But core inflation, which excludes volatile food and energy costs, was slightly higher.
Bondholders pay close attention to inflation gauges because rising prices erode the value of fixed-income assets such as Treasurys. However, most analysts say the weak economy is a bigger concern than inflation, at least in the short term.
Concerns about the health of the economy were highlighted by a report on industrial production. The Federal Reserve said production at U.S. factories, mines and utilities fell 1.5% in March, declining for the fifth month in a row.
Wednesday's economic data follow weaker-than-expected readings on consumer spending and wholesale inflation released Tuesday.
Meanwhile, stock prices seesawed as investors digested the economic news and quarterly reports from major corporations.
The bond market is also responding to the Fed's ongoing campaign to purchase $300 billion in government debt assets. The central bank is set to buy an undisclosed amount of Treasury Inflation Protected Securities, or TIPS, Thursday. So far this week, the Fed has already bought $14.7 billion worth of Treasurys.
By purchasing government debt, the central bank hopes to drive down interest rates on consumer and business loans and give a jolt to the economy.
A report from the Treasury Department said net foreign purchases of long-term U.S. securities totaled $22 billion in February versus sales of $36.8 billion the previous month.
But after subtracting certain principal repayments and stock swaps, net foreign acquisitions were $5 billion in February, according to the report. That's up from adjusted sales of $54.7 billion in January.
The monthly Treasury International Capital (TIC) report also showed that overall monthly net foreign capital outflows were $97 billion in February.
The Treasury has issued record amounts of debt to finance its expensive economic rescue efforts. But some investors have expressed concern that the huge increase in spending will drive inflation up and the value of their bond holdings lower.
Still, China continued to lead all foreign nations in purchases of U.S. debt, increasing its total holdings of Treasurys by $4.6 billion in February to $744.2 billion.
Bond prices: The benchmark 10-year bond rose 6/32 to 99 28/32, and its yield fell to 2.77% from 2.78% Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond fell 2/32 to 97 4/32, and its yield held even at 3.66%
The 2-year note fell less than 1/32 to 100 1/32, and its yield rose to 0.86% from 0.84%.
The 3-month yield fell to 0.15% from 0.17%.
Lending rates: The 3-month Libor rate was 1.11%, according to Bloomberg.com, down slightly from 1.12% on Tuesday. The overnight Libor rate was 0.26%, down from 0.27%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were unchanged. The TED spread held steady at 0.94 percentage point, even with Tuesday's reading. The narrower the TED spread, the more willing investors are to take risks.
The Libor-OIS spread was also unchanged from Thursday at 0.92 percentage points. The narrower the spread, the more cash is available for lending. 
