(Bond Market Recap for June 4th, 2012) Treasuries snapped their winning streak for the first time in four days to erase part of Friday’s gains amid a growing chatter that 10-year notes are overvalued if the prices are based on an impending economic slowdown. However, if the markets are expecting a catastrophe and trading is driven by fear, then current valuations are justifiable.
The benchmark 10-year Treasury yields climbed seven basis points, or 0.07 percentage points, to 1.52 percent, in late afternoon trade after reports of a consensus to deal with the European crisis appeared in the Wall Street Journal. Germany seems to open up to eurozone bonds and mutual support for EZ banks if other nations agreed to stricter supervision from EU institutions. The 10-year note slid 29 basis points last week and lost 36 basis points in May. After touching a record low of 2.5089 on Friday June 1, 30-year Treasury Bond yields rose five basis points to 2.57 percent on Monday.
US 10 Year Treasury Yield 1 Month Chart
Bond Funds were also down on the day with the iShares Barclays 20 Year Treasury Bond ETF (NYSE: TLT) shed $1.03, or 0.79 percent, for the day to close at $129.33, while the Vanguard Total Bond Market ETF (NYSE: BND) shed 21 cents, or 0.25 percent to finish at $84.41.
TLT 1 Month Chart
US stocks closed mostly lower Monday as a bigger-than-anticipated drop in factory orders compounded fears of a slowdown in the world’s biggest economy with hopes that the Federal Reserve may soon announce new measures to stimulate growth.
The Dow Jones Industrial Average (DJIA) shed 17.11 points, or 0.1 percent, to settle at 12,101.46 after losing as much as 83 points during the day’s trade. The Dow is off 3.8 percent in the last four trading sessions, the largest loss since Nov.25. The overall bias remained negative with 14 of the 30 components ending lower. Home Depot (NYSE: HD) and Alcoa (NYSE: AA) led the gainers list while JPMorgan Chase (NYSE: JPM) and Caterpillar (NYSE: CAT) were the biggest percentage losers.
Dow Jones Industrial Average 1 Month Chart
The S&P 500 Index (SPX) climbed 0.14 points, or 0.01 percent, to end at 1278.18 after three consecutive down days.
The NASDAQ Composite Index (COMP) added 12.53 points, or 0.5 percent, to close at 2760.01, its first gain day in four sessions.
For every stock three stocks gaining, nearly four retreated on the NYSE.
Oil prices for July delivery gained $1.07 to close at $84.30 a barrel.
Gold futures for August delivery shed 70 cents to end at $1,683.90 an ounce.