30-Year Treasuries Pare losses as Fed extends Operation Twist, Stocks Fall

(Bond Market Recap for June 20th, 2012)  30-year Treasury Bonds erased losses after the world’s largest central bank lowered growth forecasts for the year and said it was prepared to do what’s necessary to provide support for the economy, hinting at more aggressive steps if the labor market didn’t improve.

Treasuries mostly retreated after German Chancellor Angela Merkel said it’s possible for the EU region’s rescue funds to buy bonds from the secondary markets, ruling out direct sovereign debt purchases, and quickly adding her views reflected a purely theoretical statement about a legal situation. The yield on the benchmark 10-year Treasuries climbed three basis points, or 0.03 percentage point, to 1.65 percent, after swinging eight basis points during the day’s trade. After rising as much as 6 basis points, yield on 30-year bonds finished one basis point lower at 2.72 percent in late afternoon trade, New York time.

10 Year Treasury Yield 1 Month Chart

Bond Funds were mixed on the day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) gaining 62 cents, or 0.49 percent, to close at $126.04, while the Vanguard Total Bond Market ETF (BND) dropped 16 cents, or 0.19 percent to end at $84.16.

TLT 1 Month Chart

US stocks mostly closed lower Wednesday as the Federal Reserve extended its Operation Twist program but stopped short of direct intervention in the bond market, a move widely anticipated by market participants.   The Dow Jones Industrial Average (DJIA) slipped 12.94 points, or 0.1 percent, to 12,824.39, after losing over 94 points in early trade. 16 of the 30 components within the blue-chip index closed higher with JP Morgan Chase (JPM), Wal-Mart (WMT) and Cisco Inc (CSCO) among the top the percentage gainers.  Caterpillar (CAT), McDonald’s (MCD) and Proctor & Gamble (PG) were among the biggest percentage losers. Cincinnati based P&G tumbled around 3 percent after the consumer goods giant lowered its fourth quarter forecasts citing lower-than-anticipated growth in developed markets.

 Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) shed 2.29 points, or 0.2 percent, to close at 1355.69, snapping its four session long winning streak with utilities and natural resources dropping the hardest and financials and technology performing the best among its 10 business groups.
The NASDAQ Composite (COMP) made fractional gains, adding 0.69 points to settle at 2930.45, its fifth straight day of gains.
Nearly four stocks advanced for every three stocks that declined on the NYSE.

Crude oil future for July delivery slipped $2.97 to $81.06 a barrel after US Energy Information Administrations’ weekly crude report showed inventories increased by 2.9 million barrel against an expected decline.

Gold futures for August delivery lost $7.40 to $1,615.80 an ounce.

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