U.S. Treasuries’ prices fell Wednesday as stocks advanced on hopes for an economic recovery and a regional manufacturing index showed the slumping factory sector in New York state nearly pulled out of contraction in July.
An improved outlook for the economy would tend to make investors more willing to buy riskier assets like stocks and lessen their appetite for safe-haven government debt.
Stocks opened briskly higher after Intel Corp.’s solid results and upbeat outlook reinforced hopes for an economic recovery and a rebound in technology spending.
The New York Fed reported its "Empire State" general business conditions index rose to minus 0.55 in July from minus 9.41 in June, much better than economists’ expectations of minus 5.0, based on the median of forecasts in a Reuters poll.
"We saw some positive numbers on orders and shipments, the first we had seen in a long time, which suggests that maybe the manufacturing sector is turning a corner," said Gary Thayer, senior economist at Wells Fargo Advisors in St. Louis, Missouri. "It’s still a tentative sign, but consistent with other reports showing that the recession may be near an end."
Benchmark 10-year Treasury notes fell 16/32, their yields rising to 3.54 percent from 3.48 percent Tuesday.
The Federal Reserve said nationwide industrial production fell a smaller-than-expected 0.4 percent in June, suggesting that the pace of recession eased in the second quarter.
The government’s report that consumer prices rose 0.7 percent in June – but just a 0.2 percent excluding food and energy items – appeared to have little impact.
"With the better economic news, there’s some renewed concern about inflation down the road, but nothing in today’s CPI report suggests an imminent inflation problem," Thayer said.
After a month-long rally, Treasuries have been on the defensive this week as U.S. stocks have advanced since Monday. Benchmark 10-year yields rose to 3.50 percent from a low near 3.25 percent.
In morning trade, the 30-year bond was down more than a point, its yield rising to 4.46 percent from 4.38 percent Tuesday. Tuesday’s rise in the 30-year yield Tuesday was the biggest in over five weeks.
Two-year Treasury notes were down 1/32 in price, their yields rising to 0.97 percent from 0.95 percent late Tuesday, while five-year notes were down 9/32, their yields rising to 2.41 percent from 2.35 percent Tuesday. (Reuters)
