Treasury yields rise ahead of German court decision, US stocks rebound

(Bond Market Recap for September 11th, 2012) Treasury prices declined Tuesday, pushing yields higher while dollar weakened and commodities rose ahead of German Constitutional Court’s decision tomorrow over Berlin’s participation in the EUR 500 billion bailout fund as investors speculated the US Fed will announce more stimulus plans.

Yields on the benchmark 10-year Treasury note rose four basis points, or 0.04 percentage point, to 1.70 percent in late afternoon trading after Moody’s investor Services said it may cut US credit rating if the Congress failed to reduce the nation’s debt-to-GDP ratio next year. Yield on 30-year Treasury bonds rose four basis points to 2.85 percent to 2.85 percent

10 Year Treasury Yield – 1 Month Chart


Bond funds were down on the day with iShares Barclays 20 Year Treasury Bond ETF (TLT) shed 78 cents, or 0.63 percent, to close at $123.55 while the Vanguard Total Bond Market ETF (BND) lost 11 cents, or 0.13 percent to settle at $84.65.

TLT 1 Month Chart

US stocks closed higher Tuesday, bouncing back from Monday’s pullback as investors prepared for a German constitutional court’s ruling amid speculations the US Federal Reserve will announce further monetary stimulus after its two-day FOMC meeting Thursday.
The Dow Jones Industrial Average (DJIA) added 69.07 points, or 0.5 percent, to close at 13,323.36, with Bank of America (BAC) leading the gainers. Breadth within the Dow turned overwhelmingly positive with 24 of its 30-component index finishing higher. JP Morgan Chase (JPM) rose 2.2 percent after CEO Jamie Dimon said he believes the bank can weather a worst-case scenario in Europe. This is the Dow’s highest close since December 2007.  American Express (AXP) and Kraft Foods (KFT) were among the biggest percentage decliners.

Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) rose 4.48 points, or 0.3 percent, to 1433.56 with financials and energy outperforming and consumer staples and utilities lagging among its 10 business groups.  The tech-heavy NASDAQ Composite (COMP) moved fractionally higher, adding 0.51 points, or 0.02 percent, to end at 3104.53 despite the index’s biggest component Apple Inc (AAPL) losing 0.3 percent a day before its expected iPhone 5 launch.

  • For every stock declining, more than two rose on the NYSE.
  • Oil prices for October delivery gained 0.7 percent to close at $97.17 a barrel.
  • Gold futures for December delivery rose $3.10 to $1,734.90 an ounce.
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