Treasuries gain for the second day on Europe worries, US stocks dip

(Bond Market Wrapup for September 18th, 2012) – Yield on 30-year Treasury bonds dropped eight basis points in the past two days over bets the US economy will struggle even with stimulus. Treasuries gained for the second day, recouping nearly half the losses suffered since the Federal Reserve announced more mortgage-backed securities purchases last week as investors sought safe havens over US growth worries despite the housing sector improving in September while uncertainty in Europe continued to spook investors.

Yield on the benchmark 10-year Treasury notes fell three basis points, or 0.03 percentage points, to 1.81 percent despite the National Association of Builders/Wells Fargo housing-market index gaining 3 points to a seasonally-adjusted reading of 40 for the month. Aided by improving exports, the US current account trade deficit also shrank to $117 billion in the second quarter from $133 billion, signaling improvement in the economy. Yield on the 30-year Treasury bonds dropped three basis points, or 0.03 percentage point, to 3.01 percent.

The bond funds edged higher with the iShares Barclays 20 Year Treasury Bond ETF (TLT) adding 60 cents, or 0.50 percent, to end at $120.32 while the Vanguard Total Bond Market ETF (BND) gained 10 cents, or 0.12 percent, to close at $84.50.

US stocks mostly closed lower for the second day with the Dow Industrials eking out slight gains Tuesday as the housing market showed signs of improvement in September while lingering uncertainties in Europe continued to bog down investor sentiments.

The Dow Jones Industrial Average (DJIA) climbed 11.54 points, or 0.1 percent, to close at 12,564.64, with Kraft Foods (KFT) leading the percentage gainers and Alcoa Inc (AA) slipping the most. Breadth within the blue-chip index however, turned negative with decliners outpacing gainers 17 to 13.

The S&P 500 Index (SPX) shed 1.87 points, or 0.1 percent, to 1459.32 with energy dropping the most and consumer staples pacing the gainers among its 10 major business sectors.

The tech-heavy NASDAQ Composite (COMP) closed fractionally lower, shedding 0.87 points to close at 3177.80. Apple Inc (AAPL), the index’s outsized component breached the $700 mark Tuesday and settled above that level.

For every four stocks declining, three advanced on the NYSE.

Oil prices for October delivery shed $1.33 to close at $95.29 a barrel.

Gold futures for December delivery rose 60 cents to $1,771.20 an ounce.

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