Treasury 30-year bonds pare losses after Fed decision, US stocks rally

(Bond Market Wrapup for September 13th, 2012) – Treasury prices turned back higher after sliding in early trade despite the Fed announcing its decision to extend its bond purchase program by buying mortgage-backed securities indefinitely.

Treasuries trimmed early losses while the spread between 10- and 30-year Treasuries widened to the most in a year on worries the Fed’s new open-ended debt purchase program and accommodative monetary policy will spur inflation. Yields on 30-year Treasury bonds, more sensitive to inflation due to longer maturity, jumped as much as eight basis points to three percent before settling at 2.93 percent in late afternoon trade. The yield on the benchmark 10-year Treasury notes dropped four basis points, or 0.04 percentage points, to 1.72 percent.

Bond funds ended mixed with the iShares Barclays 20 Year Treasury Bond ETF (TLT) shed 48 cents, or 0.39 percent, to close at $121.53 while the Vanguard Total Bond Market ETF (BND) gained 17 cents, or 0.20 percent t end at $84.70.

US stocks rallied Thursday, extending gains for the fourth consecutive day that pushed the S&P 500 to its highest level since 2007 after Fed Chairman Ben Bernanke opted for a third round of quantitative easing to boost growth.

The Dow Jones Industrial Average (DJIA) zoomed 206.51 points, or 1.6 percent, to 13,539.86, its highest closing since December 2007. Breadth within the blue-chip index turned overwhelmingly positive with all the 30 stocks ending in green. Well Fargo (WFC), Bank of America (BAC), JP Morgan (JPM) and Alcoa (AA) led the day’s gainers.

The S&P 500 Index (SPX) rose 23.43 points, or 1.6 percent, to 1459.99 with financials fronting gains that included all the 10 business groups.  The NASDAQ Composite (COMP) jumped 41.52 points, or 1.3 percent, to close at 3155.83 with Apple Inc (AAPL) stocks hitting an all-time high of $682.98.

  • For every stock declining, four advanced on the NYSE.
  • Oil prices for October delivery gained $1.30 to close at $98.31 a barrel.
  • Gold futures for December delivery rose $35.60 to $1,772.10 an ounce.

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