Treasuries fall as Bernanke silent on bond buys, US stock rally fades


(Bond Market Wrapup for November 20th, 2012) – Treasuries fell for the second day Tuesday, pushing yield up off a two-month low after Federal Reserve Chairman Ben Bernanke used a speech in New York to plead with lawmakers to act quickly on the so-called fiscal cliff because the “stakes are high,” repeating his assertion that the central bank doesn’t have the required tools to offset the potential harm, crimping haven demand.

Analysts were hoping for confirmation that the central bank would keep purchasing long-term Treasury bonds after its easing program known as Operation Twist ends next month. Bernanke said the Fed’s monetary policies have helped offset the headwinds holding back the recovery, though it’s too early to assess the full impact of Fed’s mortgage-backed securities purchase program started in September.

US 10-year yields rose to a one-week high after a Commerce Department report showed construction of new homes rose unexpectedly to a four-year high in October. Economists had anticipated a decline due to Hurricane Sandy.

The benchmark 10-year yield increased five basis points, or 0.05 percentage point, to 1.67 percent while yield on 30-year Treasury bonds rose six basis points to 2.82 percent.

Bond funds retreated with the iShares Barclays 20 Year Treasury Bond ETF (TLT) shedding $1.26, or 1 percent, to end at $124.40, while the Vanguard Total Bond Market ETF (BND) fell 13 cents, or 0.15 percent to $84.82.

US stocks finished flat Tuesday following a choppy trading session as an increase in housing starts tempered a slide triggered by a sharp sell-off in Hewlett-Packard shares.

The Dow Jones Industrial Average (DJIA) dropped 7.45 points, or less than 0.1 percent, to 12,788.51, with Hewlett-Packard (HPQ) fronting the losses. The Dow component slumped 12 percent after it announced fourth-quarter earnings above expectations and revenue below expectations that excluded an $8.8 billion accounting charge tied to alleged fraud by an acquired company. British software firm Autonomy allegedly misrepresented its finances before its takeover by the tech behemoth.

The S&P 500 Index (SPX) rose 0.92 point, or 0.07 percent, to 1387.81 with healthcare pacing the gains and technology performing the worst among its 10 business groups. Best Buy Co (BBY) crashed 13 percent after the largest consumer-electronics retailer announced a $10 million loss for the quarter on weak sales.

The NASDAQ Composite Index (COMP) added 0.61 points, or 0.02 percent, to close at 2916.68.

Advancers managed to pull ahead of decliners on the NYSE.

Oil prices for January delivery slipped $2.53 to close at $86.75 a barrel.

Gold futures for December delivery fell $10.80 to $1,723.60 an ounce.

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