OT:Look see. What I was saying earlier. It works too. Check out the news this morning.
TREASURIES-Prices rise as investors focus on risks
Tue Oct 16, 2007 5:02pm EDT
(Updates with late prices)
By Ellen Freilich
NEW YORK, Oct 16 (Reuters) - U.S. government bond prices rose on Tuesday as credit market worries and sliding stocks prompted investors to seek the safety of Treasuries.
Disappointing earnings and outlooks from banks such as Wells Fargo & Co (WFC.N: Quote, Profile, Research) suggested an extended period of credit shortages, feeding the safe-haven bid for U.S. government bonds.
"Bonds are responding to continued negative news on the credit front, including Citicorp's earnings report yesterday, which indicated that loan losses would be a problem through the fourth quarter, and Wells Fargo today," said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
Wells Fargo on Tuesday reported that its third-quarter profit rose 4 percent, the smallest gain in more than six years, as losses climbed from mortgage, home equity and auto loans.
The plan by Bank of America (BAC.N: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) to pool funds in an attempt to prevent the dumping of billions of dollars of bonds linked to subprime mortgages and other debt also encouraged investors to buy safe-haven government debt, Sullivan said.
"The plan just underscored that this area of the credit market -- asset-backed commercial paper -- is still an area of stress," he said.
In recent months, investors have been less interested in buying asset-backed commercial paper, and funding in that market has grown more expensive.
Since hitting an all-time peak of $1.183 trillion in early August, the U.S. asset-backed commercial paper market has shrunk nearly 25 percent during an unprecedented nine consecutive weeks of contraction. As of Oct. 10, the Federal Reserve reported $899.3 billion in asset-backed commercial paper outstanding.
Equity market weakness reinforced the bid for safe-haven U.S. Treasuries, analysts said. Stocks fell for the second day in a row on Tuesday with the Dow Jones Industrial Average (.DJI: Quote, Profile, Research) falling 71.86 points, or 0.51 percent, to 13,912.94.
Higher oil prices, a potential crimp on economic growth, tepid U.S. industrial production, and another record low for an index of U.S. home-builder sentiment contributed to investors' nervousness and whetted the appetite for government debt, said Josh Stiles, senior bond strategist at IDEAglobal.
"That combination has cash flowing into the Treasury market for quality and liquidity purposes," Sullivan said.
In late trade, the benchmark 10-year note's price was up 7/32 for a yield of 4.65 percent <US10YT=RR>, compared with 4.68 percent late Monday. Bond yields and prices move inversely.
The two-year note -- which responds closely to expectations for central bank interest rate moves and is a repository for safe-haven flows -- traded up 5/32 in price for a yield of 4.13 percent <US2YT=RR>, compared with 4.23 percent late Monday.
Two-year yields were on course for their biggest one-day decline in a month as stocks fell and other so-called safe-haven assets such as gold <XAU=> rallied.
U.S. government bonds momentarily pared some gains after Treasury Department data showed a record capital outflow from U.S. assets in August of $163.0 billion.
reuters.com |
