* Strong Aug business spending boosts stocks, hurts bonds
* Stronger economy sign dents confidence Fed will buy debt
* Stock gains lure investors from safe-haven bonds
* Aug new home sales flat, but inventory at 42-year low (Adds comment, updates prices after home sales data)
By Ellen Freilich
NEW YORK, Sept 24 (Reuters) - U.S. Treasuries fell on Friday as news businesses spent heavily in August dented bond investors' confidence the Federal Reserve would need to buy debt to help the economy.
News of revived business spending spurred stock gains, drawing investors away from safe-haven U.S. government debt after a week-long bond rally. Traders cited talk of a very large asset allocation trade from bonds to equities.
The government said total orders for long-lasting goods fell in August. But what grabbed attention was what the report said about business spending: orders excluding non-defense capital goods and aircraft rose sharply.
"Business spending has a lot of momentum," said Cary Leahey, economist at Decision Economics in New York, pointing to the data as the reason for the drop in Treasury prices.
Because the market has rallied so much over the last week - fueled by the conviction the Federal Reserve would support the economy with additional debt purchases - it was vulnerable to second thoughts, analysts said.
"The signs of strength caught (the market) off-guard," Leahey said. "The market had leaned too far. It got slapped by the report, and now it's overreacting."
* Stronger economy sign dents confidence Fed will buy debt
* Stock gains lure investors from safe-haven bonds
* Aug new home sales flat, but inventory at 42-year low (Adds comment, updates prices after home sales data)
By Ellen Freilich
NEW YORK, Sept 24 (Reuters) - U.S. Treasuries fell on Friday as news businesses spent heavily in August dented bond investors' confidence the Federal Reserve would need to buy debt to help the economy.
News of revived business spending spurred stock gains, drawing investors away from safe-haven U.S. government debt after a week-long bond rally. Traders cited talk of a very large asset allocation trade from bonds to equities.
The government said total orders for long-lasting goods fell in August. But what grabbed attention was what the report said about business spending: orders excluding non-defense capital goods and aircraft rose sharply.
"Business spending has a lot of momentum," said Cary Leahey, economist at Decision Economics in New York, pointing to the data as the reason for the drop in Treasury prices.
Because the market has rallied so much over the last week - fueled by the conviction the Federal Reserve would support the economy with additional debt purchases - it was vulnerable to second thoughts, analysts said.
"The signs of strength caught (the market) off-guard," Leahey said. "The market had leaned too far. It got slapped by the report, and now it's overreacting."
No comments:
Post a Comment