Interest rates rise after drop in business inventories and rise in sales signal improvement
By APWednesday, March 10, 2010
Rates climb after report points to stronger demand
NEW YORK — Interest rates rose in the bond market Wednesday after a government report signaled that businesses are working through inventories because of stronger demand.
Treasury prices fell and pushed rates higher after the Commerce Department said that wholesale inventories slipped 0.2 percent in January. That follows a drop of 1 percent in December.
The report also found that sales rose for a 10th straight month, increasing 1.3 percent. The drop in what businesses have in stock and an increase in sales suggests that demand is increasing.
That was welcome news for the economy, but stocks posted only modest gains in part because a recent stream of improved economic numbers has been already factored in to prices. The Dow Jones industrials edged up 3 points. Major stock indexes are near their highest levels since January, when they reached 15-month highs.
The price of the 10-year note pulled off its lows after a government debt auction drew strong demand. The Treasury Department sold $21 billion in 10-year notes. The bid-to-cover ratio, which is a measure of demand, was 3.45 percent. That was well above the 2.67 from an auction last month.
The yield on the 10-year Treasury note that matures in February 2020 rose to 3.73 percent late Wednesday from 3.71 percent Tuesday. Its price fell 4/32 to 99 5/32. The 10-year yield is tied to interest rates on mortgages and other consumer loans.
On Tuesday, the government saw improved demand for a sale of $40 billion in three-year notes.
In other trading Wednesday, the yield on the 30-year bond that matures in February 2040 rose to 4.69 percent from 4.68 percent. The price fell 5/32 to 98 29/32.
The yield on the two-year note that matures in February 2012 rose to 0.91 percent from 0.88 percent. Its price fell 2/32 to 99 30/32.
The yield on the three-month T-bill that matures June 10 was flat at 0.14 percent. Its discount rate was 0.15 percent.
