Back to Bonds; Yields Tank
October 2nd, 2009Via: Los Angeles Times:
Money is pouring into Treasury bonds today, driving yields sharply lower as investors start the fourth quarter with another rush into what they perceive to be safe.
The yield on the 10-year T-note plummeted to 3.20% by about 12:20 p.m. PDT, down from 3.30% on Wednesday and the lowest since May.
The 30-year T-bond yield, charted below, has slumped below 4%, to 3.97% from 4.04% on Wednesday.
Falling market yields mean bond prices are rising.
…
The latest bond-buying binge is making individual investors look like they were ahead of the curve: The public has been voracious for bond mutual funds for the last few months even as many Wall Street bulls insisted that stocks were the smarter investment in a recovering economy.
Today, stocks are selling off amid fresh concerns about the economy’s ability to sustain a recovery, despite the surprising rise in consumer spending in August. The Dow Jones industrial average was down about 150 points, or 1.5%, to 9,564 at about 12:20 p.m. PDT.
For the bond market — or at least, high-quality bonds such as Treasuries — the explosion in demand today suggests an epiphany for many investors who’ve been disbelieving that long-term interest rates could go much lower.
Many bond pros say weakness in key economic data in recent days (including today’s report on U.S. manufacturing activity in September) has raised strong doubts about the recovery.
More investors are sensing that “the feel-good bounce in the economy created by the [government’s] fiscal stimulus is not a permanent factor,” said Tom Tucci, head of Treasury trading at RBC Capital Markets in New York.
