Treasuries fall ahead of European Meeting, US stocks stall

(Bond Market Update for May 22nd, 2012) Treasuries dropped as demand for safe haven assets fell ahead of tomorrow’s meeting in Brussels to discuss the region’s fiscal crisis and after existing home sales rose 3.4 percent in April to an annual rate of 4.62 million.

The benchmark US 10-year Treasury retreated for the third day, the longest streak in two months after touching near record-highs last week. The yield on 10-year notes rose 0.03 percentage points, or three basis points, to 1.78 percent. The yield-spread between 10-year notes and Treasury Inflation Protected Securities, a gauge of expected inflation rate during the life of securities, went up for the third straight day. The yield on 30-year bonds jumped 10 basis points, or, 0.1 percent, to 2.89 percent.

Bond Funds were also down on the day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) tumbled $1.38, or 1.11 percent, to $122.56 while the Vanguard Total Bond Market ETF (BND) slipped 0.14 cents, or 0.17 percent to settle at $83.96.

US stocks closed nearly flat Tuesday despite making early gains as worries overshadowed upbeat US economic reports ahead of a scheduled European leader’s meet in Brussels tomorrow. The markets turned choppy about an hour before closing as reports emerged that former Greek Prime Minister Lucas Papdemos has said Greece is making arrangements to leave the single-currency union.

The Dow Jones Industrial Average (DJIA) shed 2 points, or 0.01 percent, to close at 12,502.81, after rising 71 points during the day’s trade. Banking stocks were the day’s top gainers with JP Morgan Chase (JPM) surging close to 5 percent. Citigroup (C) and Bank of America rose 3 percent while Morgan Stanley (MS) and Goldman Sachs (GS) added about two percent each.

The S&P 500 Index (SPX) rose about one point to 1316.63 with the natural-resources sector fronting the loser’s list among the 10 business group.  The tech-heavy NASDAQ Composite (COMP) slipped 8.13 points, or 0.3 percent, to close at 2839.08.  Advancers just managed to outpace decliners on the NYSE.

Oil prices for June delivery shed 91 cents to close at $91.66 a barrel.

Gold futures for June delivery dropped $12.10 to $1,576.60 an ounce.

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