Congressional testimony on bail-out package on Wall Street's radar
NEW YORK (MarketWatch) -- Treasurys were mixed Tuesday, with short-term notes falling and long-term ones rising slightly, after the Labor Department reported that U.S. producer prices fell a record 2.8% in October, the most since 1947.
Excluding food and energy, core producer prices rose 0.4% in October. Analysts polled by MarketWatch had been looking for a decrease of 1.6% in overall PPI and for a 0.1% increase in the core rate.
The report "itself has had a mixed impact, as the higher than expected core reading has not sat well with stocks," analysts at Action Economics said.
Inflation normally pressures bond prices, sending their yields higher, as it erodes the value of fixed-income overtime. But longer-term bonds have more recently been used more as safe haven assets against volatility in stocks.
Short-term notes react more to the Federal Reserve's moves on interest rates. Inflation pressures, in theory, tend to make it less likely that the Fed will cut rates, which pressures short-term issues and sends their yields higher.
Yields on two-year notes rose 3 basis points to 1.203%.
Ten-year Treasury note yields fell 4 basis points to 3.616%. Thirty-year Treasury note yields dropped 3 basis point to 4.168%.
Investors turned their attention to Congressional testimony from Treasury Secretary Henry Paulson about how to use the $700 billion Troubled Asset Relief Program (TARP). On Monday, Paulson told the Wall Street Journal he wasn't likely to ask for authority to use the second half of TARP anytime soon.
Besides Paulson, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair are also due to testify.
