Treasurys reverse early losses, move higher
Treasurys reverse early losses and move higher as investors look for bargains
By Sara Lepro, AP Business Writer
On Monday July 20, 2009, 8:19 pm EDT
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Companies:Cit group, inc.
NEW YORK (AP) -- Treasurys moved higher Monday, reversing early losses, as investors took advantage of beaten-down prices ahead of testimony on the economy from Federal Reserve Chief Ben Bernanke.
Related Quotes
Symbol Price Change
CIT 1.25 +0.55
{"s" : "cit","k" : "c10,l10,p20,t10","o" : "","j" : ""} Treasurys "appear to be rallying off of oversold levels," said Christian Cooper, an interest rate strategist at RBC Capital Markets.
Bonds sold off nearly every day last week, with the exception of Thursday, as a string of solid earnings reports drove the stock market to its best weekly performance since early March. Demand for Treasurys often fades when stocks are doing well as investors seek riskier assets.
Investors are also keenly focused on what Bernanke will say about the central bank's monetary policy going forward as he readies for two days of Congressional testimony beginning Tuesday.
The market is anxious for any clues on how the Fed plans to exit the myriad of emergency programs enacted last fall when the financial crisis ballooned. The Fed has slashed interest rates, offered cheap loans to banks and purchased massive amounts of government debt to keep borrowing costs low.
Investors are concerned that the programs could spark inflation down the road by putting downward pressure on the dollar. Inflation is bad for bonds because it eats into their fixed returns over time.
At the same time, if the Fed raises rates too soon to offset inflation, investors fear the economy's recovery could be put in jeopardy, as higher rates saddle still-struggling consumers with higher borrowing costs.
In late trading, the benchmark 10-year Treasury note rose 12/32 to 96 2/32, sending its yield down to 3.60 percent from 3.65 percent late Friday.
The 30-year bond rose 15/32 to 95 22/32 and its yield fell to 4.52 percent from 4.54 percent.
The two-year note edged up 1/32 to 100 9/32, while its yield fell to 0.98 percent from 1 percent late Friday.
The yield on the three-month T-bill rose to 0.17 percent from 0.16 percent. Its discount rate was 0.18 percent.
Bond prices initially slipped Monday on word that CIT Group Inc.'s board had approved a deal with major bondholders that will help keep the company out of bankruptcy.
Worries about the commercial lender's fate had lifted Treasurys on Thursday, after negotiations with federal regulators about a possible rescue package fell through.
The cost of borrowing between banks rose. The British Bankers' Association said the rate on three-month loans in dollars -- the London Interbank Offered Rate, or Libor -- rose less than 0.01 of a percentage point to 0.51 percent.
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