The Wall Street Journal-20080111-Treasurys Fall as Stocks Rise on Countrywide News
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Treasurys Fall as Stocks Rise on Countrywide News
Treasury-bond prices declined as stocks rallied following a report that Bank of America Corp. is in talks to acquire Countrywide Financial Corp., cutting demand for the safety of government debt.
The two-year note, the most sensitive to changes in monetary policy, gave up gains made after Federal Reserve Chairman Ben Bernanke's downbeat remarks on growth, which raised expectations for more- aggressive interest-rate cuts this year.
The 10-year and 30-year sectors, already under pressure on concerns the Fed's aggressive rate-cutting stance will fuel inflation, slumped further as investors digested the Bank of America-Countrywide news.
Talk of the deal "gives some stability to the market, [and] some safe-haven flow was reduced," said Kurush Mistry, an interest-rate strategist at Lehman Brothers in New York.
The benchmark 10-year note was 26/32 point lower, or $8.125 per $1,000 face value, at 102 30/32. Its yield, which rises when prices fall, rose to 3.888% from 3.790% Wednesday. The 30-year bond fell 2 5/32 points to yield 4.443%. Ten- and 30-year Treasurys were the biggest losers of the day as investors dumped them on concern inflation will eat into their returns. Investors face crude oil at elevated levels, gold breaking records, and a falling dollar that will fuel gains in import prices.
With Mr. Bernanke's focusing more on the risks to growth, "there are those who see this as the Fed in effect raising the risk that inflation could rear its ugly head in the short term," said William O'Donnell, rates strategist at UBS Securities. "The Fed's more aggressive tone has those in the back end of the curve feeling a little bit blue," he said. "This is a party they're not going to be privy to."
Meanwhile, bond insurer MBIA Inc. is expected to sell $1 billion surplus notes today at the earliest or next week, according to an investor familiar with the deal.
Success in selling the surplus notes is a vital component of MBIA's capital-raising strategy.
AUCTION RESULTS
Here are the results of the Treasury auction of 10-year notes. All bids are
awarded at a single price at the market-clearing yield. Rates are determined
by the difference between that price and the face value.
Applications ..................................... $15,215,531,000
Accepted bids .................................... $8,000,011,000
Bids at market-clearing yield accepted ........... 89.92%
Accepted noncompetitively ........................ $96,141,000
" foreign noncompetitively ....................... $100,000,000
Auction price (rate) ............................. 99.724557 (1.655%)
Interest rate .................................... 1.625%
Cusip Number ..................................... 912828HN3
The bills are dated Jan. 15, and mature Jan. 15, 2018.
