US Treasury debt prices fell on Monday as investors took their cue from a rebounding stock market to sell debt and take back some gains from a bond rally last week. Benchmark Treasury yields reached two-month lows last week as bond prices rose on tumbling stocks and investor concerns over reduced access to credit.
Bond prices mainly have been moving in the opposite direction of stocks - when stocks slide, fearful investors turn to the relative safety of bonds, and when stocks show signs of life, bonds retreat.
"Treasuries are just watching stocks - we have no other drivers for today," said Beth Malloy, bond market analyst at Briefing.com in Chicago. "We are also weighed by last week's rally." US stocks climbed in choppy trade, with some optimism about the earnings outlook offsetting concerns about a deteriorating credit market.
Benchmark 10-year notes fell 10/32 in price to 97-19/32, pushing its yield up to 4.81 percent from 4.77 percent late on Friday. Bond prices move inversely to their yields.
Investors have been fretting lately that deteriorating credit markets will hurt chances for more corporate buyouts and dry up funding, and that losses in the subprime mortgage market may spill over into the broader economy.
In such an environment, bond traders looked to the stock market for direction. "We are getting dragged higher in yield, with stocks bouncing back. We are tracking stocks pretty closely," said Carl Lantz, US interest-rate strategist at Credit Suisse in New York, who added that "bonds were pretty extended" after last week's rally.
The broad Standard & Poor's 500 Index gained 1.03 percent, closing on Monday at 1,473.91, while the blue chip Dow Jones industrial average advanced 0.70 percent to 13,358.31 and the Nasdaq Composite Index rose 0.82 percent to 2,583.28. On Friday, stocks wrapped up their worst week in years after a two-day slide driven by credit fears.
No fresh economic data was on the agenda this week until Tuesday, and no Federal Reserve officials are scheduled to speak until after the Fed's next policy meeting on August 7.
Two-year Treasury notes declined 4/32 in price to 100-2/32 for a yield of 4.59 percent, up from 4.51 percent late on Friday, while five-year notes slipped 9/32 in price to 99-30/32 for a yield of 4.64 percent, up from 4.58 percent in the previous session. Thirty-year bonds dropped 11/32 in price to 96-25/32, while the yield rose to 4.96 percent from 4.94 percent late on Friday.