Treasury Prices Rise

From Standard & Poor's Equity Research

MARKETSCOPE : Treasury bond prices rose slightly on Tuesday, as investors watched indicators about economic factors such as prices.

The benchmark 10-year note edged up 01/32 to 101-04/32 for a yield of 4.98%. The 30-year bond also rose 01/32 to 91-13/32 for a yield of 5.06%.

Big losses in equities supported a flight to the safety of bonds. The U.S. Treasury's 4-week bill auction was strong considering the record $27 billion offered.

Treasury Secretary Paulson advocated strong dollar policy Tuesday. He noted foreign exchange values should be set in open markets according to fundamentals. He also sees the economy transitioning from an "unsustainably strong pace" through the first quarter to a "more sustainable pace."

News also hit that the U.S. Institute for Supply Management index rose to 54.7 in July from 53.8 in June. U.S. construction spending rose 0.3% in June, above the 0.1% expected and after a sharply upwardly revised flat reading in May (previously -0.4%.) U.S. Redbook reported chain store sales were steady at a -2.4% pace for the fifth week of July relative to June.

The U.S. core PCE deflator rose 0.2% in June, boosting the 3-month annualized rate at 2.9% and the year over year rate at 2.3%. U.S. planned layoffs fell to a six-year low 37,178 in July, 50% lower than a revised 75,076 in June, according to Challenger, Gray & Christmas.

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