WASHINGTON -- Treasury bond prices sank yesterday, more than wiping out the small gains mustered Tuesday after the Federal Reserve raised short-term interest rates 3/4 of a point.
Treasury Market Yields Previous Previous Wednesday Week Month3-Month Bill 5.49 5.33 5.016-Month Bill 6.02 5.85 5.551-Year Bill 6.56 6.31 6.052-Year Note 7.11 7.01 6.633-Year Note 7.42 7.36 6.925-Year Note 7.71 7.66 7.337-Year Note 7.83 7.81 7.5110-Year Note 7.95 7.96 7.6630-Year Bond 8.09 8.10 7.88
Source: Cantor, Fitzgerald / Telerate
Analysts said they could only speculate on why bonds crumbled yesterday despite a Labor Department report that consumer prices grew a slim 0.1% in October -- less than expected.
"It's pretty puzzling," said Joseph Bench, portfolio manager at New Castle Advisers in White Plains, N.Y.
Late yesterday, the 30-year bond was quoted down 20/32 at a price of 93 10/32, pushing the yield up to 8.09%. The 10-year note was down 11 ticks at 99 12/32 with a 7.96% yield.
Other note prices were little changed and bills were mixed, with yields on three-month and six-month bills at 5.51% and 6.05%, respectively.
A weaker dollar and a lack of follow-through buying from Tuesday probably pushed bonds downward yesterday, Bench said.
The lack of buy-and-hold market participants coupled with worries about new supply from next week's two- and five-year note auctions may have also undermined bonds, according to Lawrence Waldorf, portfolio manager at First Investors Asset Management.
The market is likely to retain its bearish tone through the end of the year if growth remains robust as many analysts predict, Waldorf speculated.
On the other hand, Bench said bond prices could show a little vigor if the dollar holds up against the other major currencies.
Stock Market: The Dow Jones Industrial Average rose 18.84 points yesterday to close at 3845.20.
Foreign Exchange: In late New York trading yesterday, the dollar was quoted at 98.34 Japanese yen and 1.5503 German marks.
Commodities: The Commodity Research Bureau's index closed down 0.89 point yesterday, at 232.85.