Treasurys Rise As Stocks Trade Lower
(12-31) 09:38 PST NEW YORK, (AP) —
Treasury prices rose in the final session of 2007, as investors once more hedged against a variety of risks by buying government-backed bonds.
Treasurys staged an unusually impressive rally in the past year. Weakness in the housing sector and overall economy, as well as concerns that beleaguered banks could face a year-end liquidity squeeze, provided fuel for the government bond rally.
Treasury price gains were most vigorous in August when investors grew nervous about the crisis in subprime mortgages and began shunning all forms of investment with exposure to these problems.
These themes were back in focus on Monday as the year moved to its conclusion. “Lingering demand for year-end funding should keep a lid on yields as liquidity dries up before kicking off 2008 trading on Wednesday,” said Action Economics.
The benchmark 10-year Treasury note rose 5/32 to 101 19/32 with a yield of 4.05 percent, down from 4.12 percent late Friday. Prices and yields move in opposite directions.
The 30-year long bond gained 3/32 to 108 17/32 with a yield of 4.48 percent, down from 4.50 percent late Friday.
The 2-year note was unchanged at 100 10/32 with a yield of 3.08 percent, down from 3.11 percent the previous session.
The yield on the 10-year note began the year at 4.7 percent and lost 13.8 percent of its strength as the year progressed. The yields on other Treasury maturities also lost strength in 2007.
The market was closing an hour early, at 2 p.m. EST.
Weaker Treasury yields were in line with investors’ conviction that the Federal Reserve would have to cut the Fed funds rate that it uses to make overnight loans to banks. The central bank cut rates by a full point in the latter part of the year, and continuing declines in Treasury yields indicate that more rate cuts are expected by bond market investors in 2008.
The sole data report of the day, existing home sales for this month, was slightly better than expected. But the data had little impact on trade, partly because volume is light and investors are eager to close out their books for the year.
Sales of existing homes in November rose 0.4 percent to 5 million, according to the National Association of Realtors. A poll of economists by Thomson/IFR had projected 4.97 million sales, so the result was a bit better than expected.
