TREASURIES MOVE SHARPLY HIGHER AMID ANOTHER SELL-OFF ON WALL STREET - RTT NEWS

(RTTNews) - With traders moving money out of stocks and into the relative safety of bonds, treasuries showed a strong upward move over the course of the trading day on Monday.

After seeing initial weakness, bond prices turned higher in early trading and saw further upside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 21.9 basis points to 2.339 percent.
The sharp drop extended a recent downward move by the ten-year yield, which ended the session at its lowest closing level since January of 2009.
Treasuries benefited from another sell-off on Wall Street, with the Dow down by more than 600 points at its worst levels amid news of a downgrade of the U.S. credit rating.
Late Friday, Standard & Poor's lowered its long-term sovereign credit rating on the U.S. to AA+ from AAA, marking the agency's first downgrade of the U.S. credit rating in 70 years.
S&P said that the downgrade reflects its opinion that the deficit reduction plan that Washington recently passed as part of the debt ceiling agreement falls short of what is necessary to stabilize the government's medium-term debt dynamics.
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned," S&P said.
The ratings agency also said that the outlook for the U.S. credit rating is negative, noting that it could lower the rating to AA within the next two years.
Peter Boockvar, equity strategist at Miller Tabak, said, "Putting aside the embarrassment and humiliation of losing our AAA credit rating for the first time ever, it has been and will always be the case that the market will be the final arbiter of the credit worthiness of the US."
"With yields down today and the U.S. dollar mixed against a variety of currencies, it's clear that the bond market right now is focused on the prospects for global growth and its deteriorating outlook," he added.
Looking ahead, trading on Tuesday is likely to be driven by reaction to the outcome of the Federal Reserve's latest monetary policy meeting as well as Fed Chairman Ben Bernanke's accompanying commentary.
Traders may also keep an eye on a report on second quarter labor productivity and costs as well as the results of the Treasury Department's auction of $32 billion worth of three-year notes.



Source: http://www.rttnews.com/Content/USTreasuryMarkets.aspx?Id=1686483&SM=1

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