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Bond Prices Sharply Lower

December 5, 2001

NEW YORK (AP) _ Treasury bond prices were sharply lower at midday Wednesday, after a key economic report hinted at a sooner-than-expected rebound for the nation’s struggling economy.

The price of the Treasury’s 10-year note was down 1 5/8 point, or $16.25 per $1,000 in face value, around midday Wednesday, while its yield rose to 4.86 percent from 4.66 percent late Tuesday. Prices and yields move in opposite directions.

The 30-year bonds were down 2 3/16 points and yielded 5.35 percent, up from 5.20 percent late Tuesday, according to Moneyline Telerate.

Non-manufacturing business activity rose in November to a 5-month high, the National Association of Purchasing Management reported Wednesday.

NAPM’s Non-Manufacturing Business Activity Index in November rose 10.7 percentage points to 51.3 percent from October’s 40.6 percent. Analysts were expecting a reading of 43. An index above 50 indicates expansion.

Investors responded by pulling their money out of Treasurys and into the stock market, where the Dow Jones industrial average surged more than 200 points at one point.

Yields on one-month Treasury bills fell to 1.75 percent as the discount fell 0.04 percentage point from the weekly auction to 1.73 percent.

Yields on three-month Treasury bills held at 1.74 percent as the discount remained 1.72 percent. Six-month yields rose to 1.83 percent as the discount rose 0.04 percentage point to 1.80 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

Two-year Treasury notes were down 13/32 point and yielded 3.00 percent, up from 2.79 percent late Tuesday.

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