U.S. Bond Yields Fall From 2-Year Peaks; Wall St Rebounds

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U.S. bond yields retreated from two-year highs on Tuesday on revived safe-haven bids as prices on most world stock exchanges fell to the lowest level in over a month on concerns that less U.S. monetary stimulus will hamper global growth.

U.S. Bond Yields Fall From 2-Year Peaks; Wall St Rebounds

* U.S. bond yields scale back from two-year highs

* Wall Street halts losing streak but other regional stocks droop

* Wednesday's Fed minutes could clarify policy outlook

* U.S. dollar falls to 6-month low against euro

U.S. bond yields retreated from two-year highs on Tuesday on revived safe-haven bids as prices on most world stock exchanges fell to the lowest level in over a month on concerns that less U.S. monetary stimulus will hamper global growth.

Wall Street stocks bucked the downdraft in global equities, with the Standard & Poor's 500 index rebounding from a four-day losing streak, the longest one so far this year.

The dollar fell against major currencies, hitting a six-month low against the euro on some uncertainty whether the U.S. Federal Reserve will reduce its bond purchases, though the weaker U.S. currency helped steady gold prices.

Speculation whether the Fed might shrink its bond purchases at its policy meeting next month sent oil prices lower before they recovered on news of fighting in Libya, which raised fears about oil exports from the Middle East.

"The ongoing meltdown in regional currencies is starting to negatively influence all risk assets and, for the moment, is helping create a bid for the Treasury market," said John Briggs, U.S. rate strategist at RBS Securities in Stamford, Connecticut.

The Federal Open Market Committee, the U.S. central bank's policy-setting group, will release the record of its July 30-31 meeting on Wednesday. Traders anticipate the minutes will contain clues to whether the Fed is on track to reduce its $85 billion monthly purchases of U.S. bonds at its September 17-18 meeting.

Anxiety that U.S. policymakers would dial back the Fed's third round of quantitative easing, or QE3, has been accompanied by worries the Fed is looking to raise short-term interest rates, even though Fed officials have assured markets that would not happen for a long time.

The yield on 10-year Treasury notes fell to 2.834 percent, down 6 basis points from late on Monday, when it touched 2.90 percent, a level not seen since late July 2011.

Treasury yields are benchmarks for domestic mortgage rates and other long-term borrowing costs. Some economists have cautioned the surge in yields since May would slow the housing recovery, auto sales and other rate-sensitive sectors in the world's largest economy.

German government bonds, Europe's equivalent benchmark, moved in lock step with U.S. yields, easing to 1.839 percent after topping 1.924 percent a day earlier, which was the highest level since March 2012.

The spike in Treasury yields has exerted downward pressure on stocks since last week.

"Stocks are rebounding today but we are seeing a lot of market swings because of the concerns on Fed tapering, so I wouldn't be surprised if we ended flat or lower by the end of the day," said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.

Wall Street stocks halted their longest losing streak in 2013 as major retailers reported positive profits and outlooks, signaling resilience among U.S. consumers who are dealing with meager wage growth and higher taxes this year.

Electronic retailer Best Buy Co's shares jumped 10 percent at $33.84, while department store operator J.C. Penney Co gained 6 percent at $14.01.

In mid-afternoon trading, the Dow Jones industrial average was up 49.44 points, or 0.33 percent, at 15,060.18. The Standard & Poor's 500 Index was up 11.29 points, or 0.69 percent, at 1,657.35. The Nasdaq Composite Index was up 30.64 points, or 0.85 percent, at 3,619.72.

Europe's top shares ended down 0.8 percent at 1,214.78 after hitting their lowest level in more than two weeks, while emerging stocks fell 1.22 percent at 933.33 to hit a six-week low, though both indexes had recovered slightly from their session lows.

Tokyo's Nikkei index fell 2.6 percent.

Broad equity losses weighed down the MSCI world share index . It touched its lowest since July 11 before Wall Street's gains helped pare much of its initial decline.

 

DOLLAR SLIPS, COMMODITIES RECOVER

With lingering uncertainty about whether the Fed would cut stimulus soon, the dollar index, which measures the greenback against a basket of currencies, fell 0.36 percent after touching its lowest level in more than two months.

The euro strengthened 0.6 percent versus the dollar at $1.3415, below its six-month high of $1.3452 set earlier, while the dollar fell 0.3 percent against the Japanese yen at 97.28 yen.

In commodities trade, copper futures in London rose 0.23 percent to $7,322.50 a tonne, erasing earlier losses.

Spot gold prices rose 0.46 percent at $1,371.76 per ounce, hovering near a two-month high set on Monday.

Brent crude prices rebounded from an early decline, edging up 20 cents or 0.19 percent at $110.10 a barrel, pressured by the Fed speculation but supported by the loss of Libya's oil exports as well as concerns that continuing unrest in Egypt could spread and interfere with supply. U.S. oil for October delivery was off $1.83, or 1.71 percent, at $105.03.

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