Mostly Upbeat Economic Data Weigh on Treasurys
August 4, 2009 - 4:41 PMTreasury prices gave up early gains Tuesday and closed lower for a second day as investors again funneled money into stocks.
Demand for the safety of government debt fell as investors digested a report saying that consumers spent more in June for the second straight month even as their income fell sharply.
Another dose of welcome news about the housing market helped solidify hopes that the economy might be pulling out of the longest recession since World War II. Stocks jumped sharply in the past three weeks as corporate profit reports fed hopes that the economy will start to grow again by year-end.
The mostly upbeat signs pushed down the price of the 10-year note, which is used to determine rates on mortgages and other kinds of loans. The note's price fell 12/32 to 95 12/32, sending its yield up to 3.69 percent from 3.64 percent late Monday.
Major stock indexes posted modest gains after a sharp rally Monday.
The National Association of Realtors said pending U.S. home sales rose in June for the fifth straight month. Its index increased more than expected to 94.6, from an upwardly revised reading of 91.3 in May. Reports last week on housing suggested some housing markets could be stabilizing after prices have fallen by half in some of the hardest-hit areas.
Separately, the Commerce Department said consumers increased their spending 0.4 percent in June. That was just ahead of analysts' estimates and a big jump from May, when spending rose 0.1 percent.
Personal income fell 1.3 percent, the biggest drop in more than four years and more than the 1 percent that economists had forecast. The drop in income could hurt consumer spending, which accounts for more than two-thirds of U.S. economic activity.
In late trading, the 30-year bond fell 26/32 to 96 14/32, and its yield rose to 4.47 percent from 4.41 percent.
The two-year note fell 2/32 to 99 18/32, while its yield rose to 1.22 percent from 1.19 percent.
The yield on the three-month T-bill remained flat at 0.17 percent. Its discount rate was 0.18 percent.
The cost of borrowing between banks was essentially flat. The British Bankers' Association said the rate on three-month loans in dollars - the London Interbank Offered Rate, or Libor - stood at 0.47 percent.
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