Treasuries tumble on stimulus hopes, US stocks post biggest gains of 2012

(Bond Market Wrapup for June 6th, 2012) US Treasuries tumbled with 30-year yields rising to the highest level in two months after ECB President Mario Draghi said the policy makers are “ready to act” and the EU unveiled plans for a EU-wide banking union that would deal with future crises, decoupling the financial institutions from the region’s struggling governments. However, no specific details were forthcoming.

Yield on 30-year Treasury Bonds jumped nine basis points, or 0.09 percentage points, to 2.73 percent in New York afternoon trade. The benchmark 10-year Treasury yield rose 9 basis points as well, settling at 1.65 percent for the day.

10 Year Treasury Yield 1 Month Chart

The iShares Barclays 20 Year Treasury Bond ETF (TLT) lost $2.55, or 2.00 percent, to end at $125.05, while the Vanguard Total Bond Market ETF (BND) shed 16 cents, or 0.19 percent over yesterday, to close at $84.08.

TLT 1 Month Chart

US stocks vaulted Wednesday on hopes of an impending global stimulus by central banks as the S&P 500 and the Dow industrials gained the most for 2012. Sentiments were further buoyed over speculations that the Federal Reserve may announce fresh stimulus measures on June 20 and Germany has prepared a deal to recapitalize stricken-Spanish banks without imposing external economic restrictions.

The Dow Jones Industrial Average (DJIA) zoomed 286.84 points, or 2.4 percent, to 12,414.79, its biggest single-day gain in 2012. All the 30 components of the blue-chip index advanced, led by Morgan Stanley (MS), which soared 8.4 percent. Other financial stocks including Bank of America (BAC), Citigroup (C) and JP Morgan Chase (JPM) all advanced. Home improvement retailer Home Depot Inc (HD) jumped 3.4 percent following a $500 million share buy-back announcement for fiscal 2012.

Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) rose 29.63 points, or 2.3 percent, to 1315.13 with energy faring the best among the index’s 10 business sectors. Chesapeake Energy (CHK) leapt more than seven percent amid reports that the firm is in advanced talks with Global Infrastructure Partners to sell nearly all its pipeline assets for $4 billion.

The tech-heavy NASDAQ Composite Index (COMP) added 66.61 points, or 2.4 percent, to close at 2844.72.

For every stock declining, six stocks advanced on the NYSE.

Oil prices for July delivery gained 73 cents to close at $85.02 a barrel.

Gold futures for June delivery jumped $17.30 to $1,634.20 an ounce.


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