Treasuries continue to rise as Greece fear spooks equities

(Bond Market Update for May 8th, 2012) Treasury yields sank to a three-month low as Athens struggled to form a coalition government, spiking demand for securities at a three-year US note auction to the highest level since Jan.  The bid-to-cover ratio at the $32 billion auction was recorded at 3.65 as Greece faces the prospect of a default in near future.

The yield on the benchmark 10-year Treasury dropped 3 basis points, or 0.03 percentage point, to 1.85 percent, while the yield on 30-year Treasury Bonds dropped two basis points to settle at 3.04 percent. The term premium, a valuation model created by the Fed, shows Treasuries are close to the most expensive level ever.

The iShares Barclays 20 Year Treasury Bond Fund (TLT) added 63 cents, or 0.53 percent to close at $118.79 while the Vanguard Total Bond Market ETF (BND) rose 8 cents, or 0.10 percent to settle at $83.99.

The Greece political uncertainty continued to haunt markets, sinking US equities Tuesday though major indexes managed to bounce off the day’s lows. The Dow Jones Industrial Average (DJIA) pared earlier losses to close at 12,932.09, off 76.44 points, or 0.6 percent, after a 198-point drop during the day’s trade. 25 of the index’s 30 components dropped, including McDonald Corp (MCD) after its revenue growth fell short of expectations.  Dow component Walt Disney (DIS) is due to announce earnings after close.

The S&P 500 Index (SPX) tumbled 5.86 points, or 0.4 percent, to settle at 1363.72 with the consumer discretionary sector retreating the most and healthcare and utilities settling in the positive territory among its 10 industry groups. Video game-maker Electronic Arts (EA) slumped 4.3 percent after the firm lowered its estimates for the June quarter. Fashion accessories-company Fossil plunged 38 percent after the company lowered 2012 earnings forecast.

The tech-heavy NASDAQ Composite Index (COMP) shed 11.49 points, or 0.4 percent, to close at 2946.27.

Nearly three stocks declined for every two stocks that advanced on the NYSE.

Oil prices for June delivery dropped 93 cents to close at $97.01 a barrel.

Gold futures for June delivery lost $34.60 to end at $1,604.50 an ounce.

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