Treasury prices slumped Tuesday, sending yields higher, dragged down by a drop in U.K. government bonds and gains in U.S. stocks.
"Gilts have led the G-4 debt markets lower after a big increase in U.K. December CPI," wrote analysts at RBS Securities in emailed comments.
Britain's Office for National Statistics on Tuesday said prices rose 2.9% last month compared to December 2008, accelerating from the 1.9% inflation recorded in November. Higher inflation tends to erode the value of bond holdings.
Rising U.S. stocks, propelled by rallying health insurers, also sapped interest in the safety of U.S. government debt.
In addition, the U.S. government said international purchases of Treasurys tripled to $118.3 billion in November from $38.9 billion previously, according to the latest Treasury data on capital inflows. China's holdings fell, while Japanese holdings rose.
Yields on 10-year notes (UST10Y) added 2 basis points to 3.702%. On Friday, 10-year yields fell to their lowest level since Dec.18.
U.S. financial markets were closed Monday for the Martin Luther King Day holiday.
A basis point is 1/100th percentage point. Bond prices move inversely to their yields.
Yields on 2-year notes (UST2YR) rose 2 basis points to 0.89%, also gaining after having hit their lowest since late December.
The Dow Jones Industrial Average (DJI) added 99 points, or 0.9%, to 10,708, while the S&P 500 (SPX) gained 11 points, or 1%, to 1,147.
Treasurys briefly came off lows after the National Association of Home Builders said its sentiment index fell in January to its lowest level since June.
Treasury prices rose last week as the U.S. government saw more than sufficient demand at its auctions. In addition, economic reports showed tame inflation and lower-than-expected consumer confidence as well as improvements in manufacturing.
Separately, the latest fund managers' survey from Bank of America Merrill Lynch found investors have more of an appetite for riskier stocks and assets, after months of maintaining a more cautious stance.
Copyright 2009 Dow Jones Newswires
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