Monday April 21, 10:52 PM
Treasuries decline as shadow is cast on more Fed rate cuts
NEW YORK (AP) - Treasury prices fell Monday as investors speculated that the Federal Reserve would follow the Bank of England's lead in using means beyond cutting interest rates to ease tightness in the credit markets.
The BofE
on Monday said it would enact a $100 billion plan that would allow banks to swap mortgage-backed securities for British Treasury bills. The Fed launched a similar program in March that allows investment banks to use mortgages as collateral, and some analysts feel more will come.
Government debt has long been considered a safe-haven investment during troubled market periods when the central bank is cutting rates. The market anticipates the Fed will lower rates by a quarter-percentage point when it next meets on April 30, and hold them there until year end.
The benchmark 10-year Treasury note fell 4/32 to 98 5/32 and yielded 3.72 percent, up from 3.71 percent late Friday, according to BGCantor Market Data. Prices and yields move in opposite directions.
The 30-year long bond rose 2/32 to 98 3/32 and yielded 4.49 percent, up from 4.50 percent late Friday.
The 2-year note fell 2/32 to 99 6/32 and yielded 2.17, up from 2.15 percent Friday.
In after-hours trading, some prices showed modest moves. The 2-year yield rose to 2.18 percent and the 10-year yield rose to 3.73. The 30-year yield was unchanged from its levels in regular trading.
The 3-month Treasury bill's yield was at 1.33 percent, down from 1.34 percent late Monday, while its discount rate was at 0.30 percent.
'The market is coming to grips with the fact interest rate declines are coming to an end, and that will keep pressure on the market,' said John Spinello, bond strategist at Jefferies & Co. 'England's central bank is also becoming more aggressive about inflation, and that's having an effect on Treasuries.'
There has been some talk that the Fed -- which has cut interest rates by 3 percentage points since mid-September -- may be concerned that lower rates could exacerbate inflation already seen in rising food and fuel prices.
Also weighing on prices, the Treasury Department said Monday it increased the size of the coming two-year and five-year bond auctions to cover short-term financing needs. A disappointing first-quarter report from Bank of America Corp. also did not push investors into government bonds, though stock prices fell during the session.
Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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