(Bond Market Wrapup for July 5th, 2012) Treasuries advanced as investors sought refuge in US safe-haven debt amid worries that global recovery is faltering after a coordinated cut in interest rates by the ECB, the BoE and the PBOC signaled downside risks in the EU region have materialized.
The benchmark 10-year yield dropped four basis points, or 0.04 percentage points, to 1.59 percent despite the ADP employment report showing US employers added 176,000 jobs in June, a significant improvement over last month. However, the ISM non-manufacturing index dropped to 52.1 in June from 53.7 in May, still managing to stay above the expansion-indicating 50 level. The yield on 30-year Treasury bonds slipped three basis points to 2.71 percent even though weekly jobless claims fell to a six week low of 374,000.
10 Year Treasury Yield 1 Month Chart
Bond Funds were also up on the day with The iShares Barclays 20 Year Treasury Bond ETF (TLT) rose 64 cents, or 0.51 percent, to $125.89, while the Vanguard Total Bond Market ETF (BND) gained 24 cents, or 0.28 percent, to finish at $84.49.
TLT 1 Month Chart
US stocks closed lower Thursday as weak services data along with interest rate cuts by the Bank of England, the European Central Bank and the People’s Bank of China weighed on investor sentiments, underling the global economic risk. The Dow Jones Industrial Average (DJIA) zoomed 47.15 points, or 0.4 percent, to 12,896.67, after losing more than 92 points during the day’s trade. Within the Dow, 23 of the 30 components closed lower after the Institute for Supply Management said its services index dropped to the lowest since Jan 2010. JP Morgan Chase (JPM) topped the day’s decliners, shedding 4.2 percent on the day while Bank of America (BAC) lost three percent over worries on the LIBOR manipulation investigation net being cast afar.
Dow Jones Industrial Average 1 Month Chart
The S&P 500 Index (SPX) lost 6.44 points, or 0.5 percent, to 1367.58 with energy and financials hitting the ground hardest among it 10 business sectors. Consumer discretionary advanced the most even though June same-store sales remained mostly disappointing. Ross Stores Inc (ROST) and Kohl’s Corp (KSS) surged seven percent and 6.3 percent, respectively.
The tech-heavy NASDAQ Composite (COMP) ended near flat, adding 0.04 percent to close at 2976.12 after index heavyweight Apple Inc (AAPL) added 1.8 percent in choppy trading.
Oil prices for August delivery slipped 44 cents to close at $87.22 a barrel.
Gold futures for August delivery fell $12.40 to $1,609.40 an ounce.