NEW YORK, July 31 (Reuters) - U.S. Treasuries fell on Tuesday as waning credit crunch worries sharpened investors’ appetite for risky assets like stocks and dulled the safe-haven allure of government bonds.
Benchmark 10-year Treasury notes US10YT=RR dropped 10/32 in price for a yield of 4.85 percent, versus 4.81 percent late Monday, extending their decline for a second day. Bond prices move inversely to yields.
Benchmark Treasury yields hit two-month lows on Friday as week as bond prices rose on tumbling stocks and investors’ fears that credit for corporate buyouts could dry up, deflating the recent run up in stocks.
Treasury prices mainly have been moving in the opposite direction of stocks -- when stocks slide, fearful investors turn to the relative safety of bonds, and when stocks show signs of life, bonds retreat.
“What you are seeing is kind of an equilibrium. You are seeing equities on one side and bonds on the other. It’s a flow back and forth. As one side becomes a little bit too over done, it flows into the other,” said Doug Roberts Chief investment strategist in Shrewsbury, New Jersey.
Stock index futures were pointing to a higher start Tuesday on Wall Street. [.N]
Investors were bracing for a battery of inflation, consumer confidence and manufacturing data on Tuesday morning that could offer clues on the future course of monetary policy.
Some analysts believe the Federal Reserve will cut interest rate by year end amid worries that losses in the subprime mortgage market may spill over into the broader economy.
Two-year Treasury notes US2YT=RR, the most sensitive to changing views on Fed interest rate moves, were down 3/32 in price to yield 4.65 percent, versus 4.59 percent late on Monday.
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