By Ellen Freilich
NEW YORK, Sept 16 (Reuters) - Stronger-than-expected economic data on Wednesday drove investors toward riskier assets and away from safe-haven U.S. government bonds, leading most Treasury debt prices lower.
At the same time, the difference between short- and long-term yields narrowed as a subdued inflation trend prompted some investors, who sought higher yields, to shun short-dated Treasuries in favor of those with longer maturities.
Firmer-than-expected data on August consumer prices and industrial output followed Tuesday's news of a big jump in August retail sales. For details, see
'The risk trade is definitely back on,' said Stephen Mahoney, portfolio manager at Philadelphia-based Glenmede Investment Management with $4 billion in fixed-income assets under management.
That has been evident in the stock market's gains and in investors' preference for fixed-income assets like corporate bonds and investment-grade, high-yield securities, he said.
Major stock indexes all rose more than 1 percent on Wednesday.
Meanwhile, subdued inflation reflected in a slight 0.1 percent rise in the August core consumer price index (CPI) and a 1.5 percent year-over-year decline in the total CPI increased investors' comfort with holding longer-term, fixed-income securities.
'People were selling two-year notes to buy 10-years,' said John Brady, senior vice president of interest-rate products at MF Global in Chicago. 'There are no inflation pressures here whatsoever and people are looking for a better yield.'
Two-year notes slipped 3/32 in price, yielding 1 percent compared with Tuesday's close of 0.94 percent.
Benchmark 10-year notes slipped 3/32, their yields ticking up to 3.47 percent from 3.46 percent on Tuesday.
In contrast, 30-year bonds were up 4/32, their yields easing to 4.25 percent from 4.26 percent late Tuesday.
WHIPPED AROUND
Besides views on the economy, the market was also whipped around by hedging of corporate deals amid a busy corporate issuance calendar.
At the long end, the 30-year Treasury bond was particularly volatile.
With a slew of new corporate bonds hitting the market, Treasuries bounced around as underwriters hedged by selling U.S. government debt ahead of bond pricings and later buying them back.
U.S. investment-grade corporate bond sales soared to $14.75 billion on Tuesday, the second largest one-day total this year, and a total of $17.75 billion for the week so far, according to IFR, a Thomson Reuters service.
At mid-week, the bond market is on track for its first week of losses after a five-week streak of gains.
Rallying even in the face of stronger stocks, which usually sap the strength of safe-haven Treasuries, bonds have risen on expectations the economy is set for only a gradual and fragile recovery from the worst recession in decades.
That also supported the view that the Federal Reserve would be cautious about raising interest rates from their current levels near zero. Federal funds futures suggest traders have fully priced in a 25 basis points hike by the Fed by the early summer of 2010 and another 25 basis point increase by the end of the 2010 third quarter.
(Reporting by Ellen Freilich; Editing by Gary Crosse))
((ellen.freilich@thomsonreuters.com; +1-646-223-6309; Reuters Messaging: ellen.freilich.reuters.com@reuters.net)) Keywords: MARKETS BONDS -------------- MARKET SNAPSHOT AT 1630 EDT (2030 GMT) -------------- Change vs Current Nyk yield Three-month bills 0.100 (-0.035) 0.101 Six-month bills 0.200 (-0.005) 0.203 Two-year note 100-00/32 (-03/32) 0.997 Five-year note 99-21/32 (-04/32) 2.446 10-year note 101-08/32 (-03/32) 3.475 30-year bond 103-30/32 (-01/32) 4.266 ----------------------------------------------------------- --------------------------- SWAP SPREADS ------------------- Sept 16 Sept 15 Sept 14 Sept 11 Sept 10 Sept 9 Sept 8 2-YR 34.00 34.75 33.50 32.00 32.75 34.00 34.25 3-YR 42.75 42.25 41.50 39.00 39.50 40.00 46.25 5-YR 37.25 37.25 38.50 37.75 36.00 36.00 36.75 10-YR 20.25 21.00 19.25 16.75 17.00 17.25 19.50 30-YR -11.50 -11.75 -13.75 -16.50 -15.75 -17.25 -14.75 (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Sept 16 (Reuters) - Stronger-than-expected economic data on Wednesday drove investors toward riskier assets and away from safe-haven U.S. government bonds, leading most Treasury debt prices lower.
At the same time, the difference between short- and long-term yields narrowed as a subdued inflation trend prompted some investors, who sought higher yields, to shun short-dated Treasuries in favor of those with longer maturities.
Firmer-than-expected data on August consumer prices and industrial output followed Tuesday's news of a big jump in August retail sales. For details, see
'The risk trade is definitely back on,' said Stephen Mahoney, portfolio manager at Philadelphia-based Glenmede Investment Management with $4 billion in fixed-income assets under management.
That has been evident in the stock market's gains and in investors' preference for fixed-income assets like corporate bonds and investment-grade, high-yield securities, he said.
Major stock indexes all rose more than 1 percent on Wednesday.
Meanwhile, subdued inflation reflected in a slight 0.1 percent rise in the August core consumer price index (CPI) and a 1.5 percent year-over-year decline in the total CPI increased investors' comfort with holding longer-term, fixed-income securities.
'People were selling two-year notes to buy 10-years,' said John Brady, senior vice president of interest-rate products at MF Global in Chicago. 'There are no inflation pressures here whatsoever and people are looking for a better yield.'
Two-year notes slipped 3/32 in price, yielding 1 percent compared with Tuesday's close of 0.94 percent.
Benchmark 10-year notes slipped 3/32, their yields ticking up to 3.47 percent from 3.46 percent on Tuesday.
In contrast, 30-year bonds were up 4/32, their yields easing to 4.25 percent from 4.26 percent late Tuesday.
WHIPPED AROUND
Besides views on the economy, the market was also whipped around by hedging of corporate deals amid a busy corporate issuance calendar.
At the long end, the 30-year Treasury bond was particularly volatile.
With a slew of new corporate bonds hitting the market, Treasuries bounced around as underwriters hedged by selling U.S. government debt ahead of bond pricings and later buying them back.
U.S. investment-grade corporate bond sales soared to $14.75 billion on Tuesday, the second largest one-day total this year, and a total of $17.75 billion for the week so far, according to IFR, a Thomson Reuters service.
At mid-week, the bond market is on track for its first week of losses after a five-week streak of gains.
Rallying even in the face of stronger stocks, which usually sap the strength of safe-haven Treasuries, bonds have risen on expectations the economy is set for only a gradual and fragile recovery from the worst recession in decades.
That also supported the view that the Federal Reserve would be cautious about raising interest rates from their current levels near zero. Federal funds futures suggest traders have fully priced in a 25 basis points hike by the Fed by the early summer of 2010 and another 25 basis point increase by the end of the 2010 third quarter.
(Reporting by Ellen Freilich; Editing by Gary Crosse))
((ellen.freilich@thomsonreuters.com; +1-646-223-6309; Reuters Messaging: ellen.freilich.reuters.com@reuters.net)) Keywords: MARKETS BONDS -------------- MARKET SNAPSHOT AT 1630 EDT (2030 GMT) -------------- Change vs Current Nyk yield Three-month bills 0.100 (-0.035) 0.101 Six-month bills 0.200 (-0.005) 0.203 Two-year note 100-00/32 (-03/32) 0.997 Five-year note 99-21/32 (-04/32) 2.446 10-year note 101-08/32 (-03/32) 3.475 30-year bond 103-30/32 (-01/32) 4.266 ----------------------------------------------------------- --------------------------- SWAP SPREADS ------------------- Sept 16 Sept 15 Sept 14 Sept 11 Sept 10 Sept 9 Sept 8 2-YR 34.00 34.75 33.50 32.00 32.75 34.00 34.25 3-YR 42.75 42.25 41.50 39.00 39.50 40.00 46.25 5-YR 37.25 37.25 38.50 37.75 36.00 36.00 36.75 10-YR 20.25 21.00 19.25 16.75 17.00 17.25 19.50 30-YR -11.50 -11.75 -13.75 -16.50 -15.75 -17.25 -14.75 (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2009 AFX News
