Treasury Bond Market

March 14, 2012 by staff 

Treasury Bond Market, Traders dumped U.S. Treasury debt Tuesday after strong retail sales data and a Federal Reserve policy announcement dampened hopes that the Fed will buy more bonds to stimulate the economy.

The yield on the 10-year Treasury note leaped above its highest closing level in more than four months after the Fed said short-term inflation is likely and the labor market recovery has strengthened.

The yield on the 10-year Treasury note rose to 2.11 percent as of 3 p.m. Eastern time from 2.03 percent late Monday. Its price fell 72 cents for every $100 invested.

An auction of $21 billion in 10-year notes drew strong interest and high bids, a sign that overall demand remains strong for the ultra-safe investments. The notes were priced to yield 2.08 percent, lower than the market yield at the time. That means bids came in higher than market prices, a sign of good demand.

The yield on the 10-year note rose all morning before the auction took place. Traders dumped Treasurys after the government said that retail sales rose 1.1 percent in February, the biggest gain since September. The strengthening labor market helped Americans buy more autos, clothes and appliances.

Positive economic news generally reduces demand for low-risk Treasurys. Traders would rather put their money in investments such as stocks, which can deliver bigger profits when the economy is strong. Stocks rose sharply on Tuesday.

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