Yields on most government securities moved higher Tuesday despite a government report showing the steepest drop in wholesale prices in two years.
The 30-year Treasury bond was the exception. In late trading, the yield on the long bond was unchanged at 6.62%.
But 10-year notes yielded 5.75%, up 3 basis points, and two-year notes yielded 4.02%, up 7 basis points. The bond-equivalent yield on three-month Treasury bills was 3.1 1%, up 5 basis points.
Dow Falls Slightly
Stocks were mixed, as investors registered caution about the June consumer price index, to be announced today. The Dow Jones industrial average lost 8.94 to 3,515.44. The Standard & Poor's 500 index fell 0.89 to 448.09. But the Nasdaq composite index rose 0.8 point to 708.47.
The dollar, which had risen sharply Monday on talk of a cut in European rate cuts, lost ground on Tuesday, as the good news on inflation seemed to preclude a tightening of credit by the Federal Reserve. Late in New York, the dollar was quoted at 1.7187 German marks, down from 1.7305, and at 108.10 yen, down from 109.40.
Rise Laid to Profit Taking
The Commerce Department said the producer price index fell 0.3% in June, aided by a 5.9% cut in tobacco prices. The last time the index fell that much was in March 1991. The index was unchanged in May.
Market analysts attributed the rise in interest rates to profit taking. The market has rallied in recent days -- driving the yield on 30-year Treasuries to record lows -- on anticipation of good news on inflation.
"We've just seen some ringing of the cash register," said Kevin Flanagan, money market economist for Dean Witter Reynolds Inc.
Astrid Adolfson, economist for MCM MoneyWatch, noted that investors were also nervous about today's consumer price and retail sales reports.