By Richard Leong
NEW YORK, Oct 14 (Reuters) - U.S. Treasury prices fell on Wednesday as a Wall Street rally inspired by strong company results and better-than-expected retail sales figures reduced a safety bid for U.S. government debt.
The Dow Jones Industrial average topped the 10,000 mark for the first in a year as other U.S. equity benchmarks gained more than 1 percent. For more, see
'Of course, this has created downward motivation for bonds,' said Ian Lyngen, senior government bond strategist with CRT Capital Group in Stamford, Connecticut.
Improving economic data and corporate earnings from bellwethers like Intel and JP Morgan, raised the prospects of a sustained economic rebound.
The signs of strength increased the risk the Federal Reserve would raise interest rates sooner rather than later in a bid to avert inflation, which is negative for bonds.
The Fed's staff upgraded its forecast on real growth over the second half of this year and 2010, according to minutes on the Federal Open Market Committee meeting in September released on Wednesday. For more, see
But the FOMC, the Fed's rate-setting group, saw downside risks to the economy due to high unemployment and weakness in commercial construction.
This economic view will likely keep the Fed from ending its ultra-loose monetary policy. In fact, Fed policy-makers discussed increasing purchases of mortgage-backed securities to help end the worst U.S. downturn in 70 years.
'The Fed is not going to remove accommodation any time soon,' Lyngen said.
When news that some FOMC members had considered expanding asset purchases, Treasury prices briefly pared their earlier losses, but the move soon faded when it became clear that the discussion was about MBS not Treasuries.
The price on benchmark 10-year notes ended down 24/32 at 101-21/32 after posting a session low of 101-17/32. Their yield, which moves inversely to their price, was 3.43 percent, up 10 basis points on the day.
As the pillar of its quantitative easing program, the Fed said it will buy up to $1.25 trillion in mortgage-backed securities. It will also purchase $200 billion in agency debt and has nearly bought $300 billion in Treasuries.
Given the Fed's massive efforts, there have been signs the economy is on a path of recovery.
Earlier, the government reported U.S. retail sales fell less than expected in September. Goldman Sachs economists said real spending rose between 2 percent and 3 percent at an annual rate in the third quarter.
'We evidently have hit the bedrock level of consumer spending and can even see a little bit of normalcy going forward,' said Pierre Ellis, senior economist at Decision Economics in New York.
(Additional reporting by Ellen Freilich; Editing by Kenneth Barry) (richard.leong@thomsonreuters.com ; +1 646 223 6313; Reuters Messaging: richard.leong.reuters.com@reuters.net ) 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, Oct 14 (Reuters) - U.S. Treasury prices fell on Wednesday as a Wall Street rally inspired by strong company results and better-than-expected retail sales figures reduced a safety bid for U.S. government debt.
The Dow Jones Industrial average topped the 10,000 mark for the first in a year as other U.S. equity benchmarks gained more than 1 percent. For more, see
'Of course, this has created downward motivation for bonds,' said Ian Lyngen, senior government bond strategist with CRT Capital Group in Stamford, Connecticut.
Improving economic data and corporate earnings from bellwethers like Intel and JP Morgan, raised the prospects of a sustained economic rebound.
The signs of strength increased the risk the Federal Reserve would raise interest rates sooner rather than later in a bid to avert inflation, which is negative for bonds.
The Fed's staff upgraded its forecast on real growth over the second half of this year and 2010, according to minutes on the Federal Open Market Committee meeting in September released on Wednesday. For more, see
But the FOMC, the Fed's rate-setting group, saw downside risks to the economy due to high unemployment and weakness in commercial construction.
This economic view will likely keep the Fed from ending its ultra-loose monetary policy. In fact, Fed policy-makers discussed increasing purchases of mortgage-backed securities to help end the worst U.S. downturn in 70 years.
'The Fed is not going to remove accommodation any time soon,' Lyngen said.
When news that some FOMC members had considered expanding asset purchases, Treasury prices briefly pared their earlier losses, but the move soon faded when it became clear that the discussion was about MBS not Treasuries.
The price on benchmark 10-year notes ended down 24/32 at 101-21/32 after posting a session low of 101-17/32. Their yield, which moves inversely to their price, was 3.43 percent, up 10 basis points on the day.
As the pillar of its quantitative easing program, the Fed said it will buy up to $1.25 trillion in mortgage-backed securities. It will also purchase $200 billion in agency debt and has nearly bought $300 billion in Treasuries.
Given the Fed's massive efforts, there have been signs the economy is on a path of recovery.
Earlier, the government reported U.S. retail sales fell less than expected in September. Goldman Sachs economists said real spending rose between 2 percent and 3 percent at an annual rate in the third quarter.
'We evidently have hit the bedrock level of consumer spending and can even see a little bit of normalcy going forward,' said Pierre Ellis, senior economist at Decision Economics in New York.
(Additional reporting by Ellen Freilich; Editing by Kenneth Barry) (richard.leong@thomsonreuters.com ; +1 646 223 6313; Reuters Messaging: richard.leong.reuters.com@reuters.net ) 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.
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