NEW YORK (AP) - Treasurys advanced Monday, with investors again seeking
safety in response to a drop in stocks and a big jump in crude oil prices.
Government debt looked more attractive as crude oil prices passed $120 a
barrel for the first time. Higher oil prices tend to raise concerns in the bond
market about inflation that can erode the value of fixed-income investments, but
Treasurys rose nonetheless as investors drew money away from Wall Street on
concerns that consumers might cut back spending on discretionary items.
Bonds showed little reaction to a key reading on the U.S. service sector.
The Institute for Supply Management said its April index of nonmanufacturing
activity rose to 52 from 49.6 in March. A reading above 50 signals economic
expansion; analysts had expected the figure would come in at 49.3, according to
economists surveyed by Thomson Financial/IFR.
The benchmark 10-year Treasury rose 2/32 to 97 2/32 and yielded 3.86
percent, up from 3.84 percent late Friday, according to BGCantor Market Data.
Prices and yields move in opposite directions.
The 30-year long bond fell 7/32 to 96 12/32 and yielded 4.60 percent, up
from 4.49 percent late Friday.
The 2-year note fell 1/32 to 99 13/32 and yielded 2.43 percent, down from
2.44 percent late Friday. The gains in government debt came with markets in
Britain and Japan closed for holidays, which made for a light day of trading.
Investors were awaiting Wednesday's auction of $15 billion of 10-year notes,
to be followed by $6 billion of 30-year Treasurys on Thursday.
Tom Di Galoma, head of Treasurys trading at Jefferies & Co., said the focus
this week will be on the auctions. He also believes the market might be at an
important point after 2-year notes, which are the most sensitive to economic
news and interest rate changes, held steady after the government released a
better than expected payroll report on Friday. The Labor Department said 20,000
jobs were cut last month, compared to expectations for 375,000.
"The bottom line is a successful test of the levels should rally bonds in
the short term," he said.
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