Treasury bonds rebound after data, retail sales
AP , New York: Aug 7 2008
Made Popular Aug 7 2008

Treasury bond prices rebounded Thursday as investors sought safe-haven investments after a surprise jump in weekly unemployment claims and disappointing sales reports from retailers.

The Labor Department said the number of newly laid off people seeking jobless benefits rose by a seasonally adjusted 7,000 to 455,000 last week, the highest level since March 2002. That was well above projections that new claims would rise to about 430,000.

Meanwhile, same-store sales reports from dozens of retailers led to a grim outlook for the back-to-school shopping season. Wal-Mart Stores Inc., among others, fell short of Wall Street expectations. The world’s largest retailer projected that sales would slow in August as the benefits from the government’s tax rebate checks fade.

There was also stronger-than-forecast demand for the Treasury’s auction of $10 billion worth of 30-year bonds. The sale was the biggest of the maturity since 2006, and came one day after it sold $17 billion of 10-year notes.

In afternoon trading, the 10-year Treasury note traded up 2 at 100 20/32. Its yield was at 3.92 percent compared to 4.05 percent late Wednesday, according to BGCantor Market Data. Yields move in the opposite direction from prices.

The new 30-year long bond rose 2 8/32 to 97 5/32. Its yield fell to 4.55 percent from 4.70 percent Wednesday.

The 2-year note, which is most sensitive to interest rate changes, added 7/32 to 100 18/32, and yielded 2.45 percent, down from 2.58 percent.

Tom di Galoma, head of Treasurys trading at Jefferies & Co., also pointed to more unease about the financial sector as another reason why investors moved into the relative safety of government debt. Disappointing results from insurer American International Group Inc. raised concerns that financial companies face more write-downs from the credit crisis, and that led major stock indexes lower.

“There is still concern about the health of the financials,” he said. “We’ve seen a downtrend in Treasury prices, and I think investors are now once again buying on the dips. We could see a continuation of this rally.”

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