Treasuries Fall as Dollar Halts Drop While U.S. Stocks Pare Gain

New York (Mar 29)  Treasuries fell while the dollar snapped a five-day slump as growth in consumer spending boosted speculation the Federal Reserve will continue to reduce stimulus. U.S. stocks pared early gains, while industrial metals rose amid speculation China will do more to support growth.

Ten-year Treasury yields increased four basis points to 2.72 percent at 4 p.m. in New York and the Bloomberg Dollar Spot Index rose for the first time in six sessions, strengthening 0.1 percent. The Standard & Poor’s 500 Index added 0.5 percent to 1,857.62 after jumping almost 1 percent while the Nasdaq Composite Index erased most of a 1.3 percent advance.

Consumer spending in the U.S. rose in February by the most in three months as incomes increased, a sign that economic momentum was returning as Americans recovered from an unusually harsh winter. China has policies in reserve to deal with any economic volatility this year and can’t ignore “difficulties and risks” from a slowdown in the economy, Premier Li Keqiang said in a statement on the government’s website.

“We’ve had better data and that has been bond market negative today,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. “The ten-year note is straddling the line between optimism and cautiousness. Economic data has been better, and that is weighing on the market, but there is still a question about upcoming data.”

Yield Curve

Shorter-term borrowing costs rose after Federal Reserve Bank of Chicago President Charles Evans said the central bank will probably raise interest rates in the second half of next year. Policy maker have trimmed bond purchases at each of the past three meetings. The difference between five- and 30-year yields shrank to as little as 1.79 percentage points this week, the least since 2009. Bill Gross, manager of the world’s biggest bond fund, said core inflation of “only” 1.1 percent was overlooked by the market.

The S&P 500 rebounded today after falling for the fourth time in five days, as banks, consumer, commodity and technology companies led losses during the week. Investors had been selling the bull market’s biggest winners this week, locking in gains as they assess the strength of the U.S. economy and whether the situation in Ukraine will worsen.

Source: BusinessWeek