Benchmark Yield Dips As Credit Worries Weigh Against Stock Market’s Advance
Treasury debt prices barely budged Wednesday, after stocks bounced back on strong corporate profits that shifted investors’ focus from credit concerns.
Trade was choppy, reflecting large swings in U.S. equities markets where sentiment was torn between credit worries sparked by news that Chrysler had postponed a $12 billion auto loan deal and strong profits.
That left Treasury investors indecisive, although benchmark yields briefly dipped to a seven-week low.
“Treasuries are taking their cue from the stock market. Being their earnings (reporting) season, it’s just been very volatile, leaving Treasuries pretty much unchanged,” said Rudy Narvas, senior analyst at the market analysis company 4Cast.
Concerns about financing for takeovers temporarily weighed on the stock market, allowing the bond market to tap a modest flight-to-quality bid and driving the yield on the benchmark 10-year note to just below 4.90 % its lowest since the start of June.
In late New York trade, the 10-year note was up in price for a yield of 4.90%, compared with 4.92% late Tuesday. Two-year notes were unchanged in price to yield 4.74%, compared with 4.75%. Bond prices and yields move inversely.
The market was little moved by a lackluster auction of $18 billion worth of two-year notes. The Federal Reserve’s beige book, an anecdotal summary of economic conditions around the U.S., also attracted mild interest from the bond market.
The report noted moderate economic growth in several districts. It said districts overall reported continuing production cost pressures, especially for oil-related items.
Analysts said it was a reminder to investors that inflation remains a concern for the central bank, with some suggesting that those worries could see the 30-year government bond struggle to break below 5.00%.
“It’s almost like 5% is the tipping point. Part of that is the overhang from inflation,” said Doug Roberts, chief investment strategist at Channel Capital Research.
The 30-year bond traded up 2/32 in price for a yield of 5.02%, compared with 5.03% late Tuesday.