Treasury Prices Fall After Stocks Bounce

NEW YORK -- Treasury prices were lower Wednesday after a topsy-turvy session driven by renewed volatility in the stock market.

At 5 p.m. EST, the 10-year Treasury note was down $3.75 per $1,000 in face value, or 12/32 point, from its level at 5 p.m. Tuesday. Its yield, which moves in the opposite direction, rose to 4.54 percent from 4.49 percent.

The 30-year bond fell 24/32 point. Its yield rose to 4.70 percent from 4.66 percent.

The 2-year note fell 3/32 point. Its yield rose to 4.56 percent from 4.51 percent.

Yields on 3-month Treasury bills were 5.05 percent as the discount rate fell 0.02 percentage point to 4.92 percent.

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An afternoon rally in the Dow Jones industrial average left the stock market in the black late in the session, after the index had earlier dipped below the 12,000-point mark for the first time since Nov. 6.

That decline in stocks came amid continued concerns about the U.S. subprime mortgage market and followed sharp selling in overseas stock markets overnight Wednesday.

Rick Klingman, head of Treasurys trading at ABN Amro in New York, said that Treasury markets had been completely driven by the twists and turns in the U.S. stock market Wednesday.

The late day turnaround in stocks came despite investors remaining jittery about the state of the subprime market and, more broadly, the U.S. economy.

The subprime news was actually mixed Wednesday. Lehman Brothers' first-quarter results did hint at some difficulties in the mortgage bond sector, but the firm moved to quell investor concerns about its exposure.

Chief Financial Officer Chris O'Meara said less than 3 percent of the firm's revenue in the past 18 months came from selling and securitizing loans to borrowers in the U.S. with weak credit histories.

The firm, he added, is confident it has hedged its exposure to loans still on its books, and could even acquire additional subprime assets if such purchases made business sense.

However, H&R Block Inc. said Wednesday that while its beleaguered subprime lender Option One had obtained waivers from its lenders, it may not be able to comply with the new deadline of April 27 to meet a loan agreement.

The markets are looking ahead to Thursday's economic reports including wholesale prices, jobless claims and a couple of manufacturing surveys. However, Ian Lyngen, interest rate strategist at RBS Greenwich, in Greenwich, Conn., said that another speech by former Federal Reserve Chairman Alan Greenspan will also be a key focus, especially after his recent comments on a possible U.S. recession in 2007.

"There's likely to be some kind of tradable comments on that," Lyngen said.

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