Tags: treasury | bond | yield

Treasury Yields Climb for 9th Straight Day

Monday, 19 March 2012 05:21 PM

Prices for U.S. Treasury debt slumped—and yields rose—for a ninth straight day Monday as the improving economic outlook made other investments more attractive.

The 10-year note is having its longest losing streak since 2006. Its yield is near a seven-month high. A bond's yield rises as its price falls.

Traders' faith in the economic recovery has strengthened on recent data about hiring, manufacturing and consumer spending. Bonds sold off last week after the Federal Reserve described the economy in more positive terms than it had used previously.

The Fed also said that 15 of the 19 biggest financial companies are strong enough to survive a deeper recession than the one that followed the collapse of Lehman Brothers in 2008. That boosted confidence that the financial system can withstand a shock, such as from the European debt crisis, without causing major economic harm.

The Fed's announcements made it appear less likely that the central bank will launch another round of bond-buying or otherwise intervene to reduce interest rates and encourage investment. Speculation about more Fed action had fueled some of the speculative buying that kept the yield on the 10-year note extremely low all winter.

As investors gain confidence in the recovery, they trade in their bonds for higher-risk investments, such as stocks, that offer bigger potential returns in periods of growth. Under that scenario, demand for bonds sinks, sending their prices lower and their yields higher.

For the past week, the market has embraced riskier bets, pushing the Standard & Poor's 500 index and the Dow Jones industrial average to gains in eight of the past nine trading sessions. The slide in Treasurys follows a historic rally that pushed the 10-year yield to a record low last year.

The price of the 10-year Treasury note fell 53 cents for every $100 invested as of 4 p.m. Eastern time, pushing its yield up to 2.36 percent from 2.30 percent late Friday. The 10-year yield last settled above that level on Oct. 27, when it hit 2.40 percent.

The yield touched that level briefly on Monday. It last settled higher on Aug. 5.

The price of the 30-year Treasury bond fell $1 for every $100 invested, pushing its yield up to 3.46 percent from 3.41 percent late Friday.

The yield on the 2-year Treasury note rose to 0.38 percent from 0.37 percent late Friday.

The yield on the three-month Treasury bill was unchanged at 0.08 percent.

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Monday, 19 March 2012 05:21 PM
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