Treasuries, shares resuscitate; Fed still weighs
By Angela Moon
NEW YORK (Reuters) - U.S. Treasuries and global equities managed to claw back from steep losses on Monday, with the price of the 30-year bond turning higher late in the day, though Wall Street stocks still finished lower as investors remained nervous that the U.S. Federal Reserve could soon pare back its bond purchase program.
Yields on U.S. Treasuries, which move inversely to their price, fell from near two-year highs in late afternoon while Wall Street recovered some of its earlier losses as investors found a buying opportunity after the S&P 500 fell more than 2 percent.
Comments from the president of the Federal Reserve Bank of Dallas, Richard Fisher, that the U.S. central bank will be running an accommodative policy even if it reduces stimulus may have helped add a bid to bonds.
But fears the Fed might pare its bond purchases later this year and raise short-term interest rates not too long after kept many investors away from markets.
The shift out of assets that have benefited most from cheap money has been sharpest in the U.S. debt market, where yields on 10-year Treasury notes at one point spiked to a two-year high of 2.67 percent on Monday. The 10-year note yield has risen a full percentage point in a little more than a month. <US/>
"The exit door is not that big and everyone's going at the same time," said Justin Lederer, strategist at Cantor Fitzgerald in New York. "This is not just about a Treasury backup, this is a global, everyone-getting-out-of-everything."
The declines were spurred after the Federal Reserve signaled last week that the era of cheap central bank money, which caused many assets to hit record highs, was coming to an end. They have been exacerbated by China's battle to transition to a lower-growth economy.
Both events are unprecedented and have driven a sharp rise in risk aversion among investors. Chinese shares on Monday suffered their biggest daily loss since August 2009 on worries the country's central bank would keep money tight. Continued...