US Treasury debt prices rose on Monday, as the stock market turned negative in late trading on higher oil prices and weakness in pharmaceuticals shares, reviving the safety bids for bonds.
Disappointing results from credit card issuer American Express and iPod maker Apple fanned fears about flagging consumer spending and reinforced the perception the Federal Reserve will hold interest rates steady into year-end despite inflationary pressure, analysts said.
The earnings miss by American Express "points to further weakness in the consumer sector in the second half of the year," said Derrick Wulf, portfolio manager at Dwight Asset Management in Burlington, Vermont.
The bounce in Treasuries was limited by an improved outlook on the US banking sector after better-than-expected quarterly results from Bank of America, together with $56 billion in new government debt supply, analysts said. The three major US stock indexes closed down as much as 0.25 percent on Monday. Stock futures fell after the closing bells in the wake of the news from Apple and American Express.
The benchmark 10-year Treasury note traded 11/32 higher at 98-20/32 in price, erasing an initial decline. Its yield, which moves inversely to its price, was 4.05 percent, down from 4.09 percent late on Friday. The two-year note ended up 3/32 for a yield of 2.61 percent, compared with 2.49 percent late Friday and below a session high of 2.73 percent.
The Treasury announced on Monday it will sell a record $31 billion of 2-year notes on Wednesday and sell $21 billion of 5-year notes on Thursday. It will conduct a $6 billion reopening of a prior 20-year Treasury Inflation-Protected Securities on Tuesday.
Surprisingly weak results from American Express as it set aside more money to cover credit losses and a disappointing outlook from Apple overshadowed the better-than-expected earnings from Bank of America, which had calmed some jitters about more losses and write-downs among US banks due to the housing downturn.
Oil prices climbed above $131 a barrel on Monday after last week's record decline in dollar terms. In other cash trading, five-year Treasuries were up 7/32 in price for a 3.37 percent yield, down from 3.42 percent late Friday, while the 30-year bond, which was battered last week, was up 12/32 for a yield of 4.62 percent, lower than late Friday's 4.65 percent.
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