Treasury yields fall to 10-week low on budget worries; US stocks higher

(Bond Market Wrapup for November 16th, 2012) – Treasuries rose to cap a fourth weekly gain, the longest stretch of increases since July on concerns of an impasse over budget negotiations. 10-year yield touched a 10-week low after an early Federal Reserve report showed US industrial production fell by 0.4 percent in October, falling short of expectations and stoking fears the economy is slowing down. Also strife in the Middle East continued to weigh on investors. Palestinians fired missiles that hit areas around Tel Aviv and Jerusalem while Israel retaliated by increasing its bombing of the Gaza strip.

The benchmark 10-year Treasury yield fell two basis points, or 0.02 percentage point, to 1.57 percent while yield on 30-year Treasury bonds finished flat at 2.72 percent in late afternoon trade, New York time.

Bond funds extended losses into the second session with the iShares Barclays 20 Year Treasury Bond ETF (TLT) shedding 11 cents, or 0.08 percent, to end at $126.37, while the Vanguard Total Bond Market ETF (BND) dropped 4 cents, or 0.04 percent, to finish at $84.95.

US stocks closed higher Friday paring weekly losses as Republican House Speaker John Boehner termed discussions with President Barack Obama on the budget as constructive and would accept government spending cuts and revenue increases.

The Dow Jones Industrial Average (DJIA) rose 45.93 points, or 0.4 percent, to 12,588.31, halting a four-session losing streak. Breadth turned positive with winners outnumbering decliners 22 to 8 at final bell. Weekly drop for the blue-chip index was trimmed at 1.77 percent, capping losses for the fourth week, the longest losing streak since August 2011.

Cutting weekly losses to 1.5 percent, the S&P 500 Index (SPX) climbed 6.55 points, or 0.5 percent, to 1359.88 with healthcare and utilities pacing the gains and Transportation finishing lower among the 10 business groups.

The NASDAQ Composite Index (COMP) added 16.19 points, or 0.6 percent, to close at 2853.13, still down 1.8 percent for the week.

For every stock declining, nearly three rose on the NYSE.

Oil prices for December delivery gained $1.22 to close at $86.67 a barrel.

Gold futures for April delivery rose 90 cents to $1,714.70 an ounce.

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