November 12th, 2010
10:26 PM ET

Treasury prices fall as Fed begins debt buyback program

A look at the day's business news headlines:

Stocks close out worst week in 3 months 
 
A sell-off in U.S. stocks picked up steam Friday afternoon, following a volatile trading session in Asian markets that ended with the Shanghai Composite down more than 5 percent.

The Dow Jones industrial average fell 91 points, or 0.8%, with 26 of the 30 blue chip index's components ending in the red. Boeing and Alcoa were the biggest laggards.

The S&P 500 lost 14 points, or 1.2 percent, and the tech-heavy Nasdaq decreased 37 points, or 1.5 percent.

The steep slide came at the end of a mostly down week, with the Dow and the S&P posting losses for four out of the last five days. All three major indexes logged their biggest weekly drops in three months: the Dow and the S&P fell 2.2 percent, while the Nasdaq sank 2.4 percent.

Commodities fall off a cliff 
 
The commodities rally has cooled off, with prices for precious metals, oil and agricultural raw materials plunging Friday after a record-breaking run earlier in the week.

A surprise jump in China's inflation rate spooked investors and sparked a sharp sell-off Friday. China's announcement that consumer prices in the country rose 4.4 percent in October fueled fears that the world's second-largest economy is barreling ahead at an unsustainable speed.

Investors are concerned the Chinese government could raise interest rates, as a way to slow down staggering inflation. And because China is a major consumer of raw materials, that could lead to less demand for commodities across the board.

Precious metals plunged as a result. Coming off nearly daily record highs, gold fell $37.80, or 2.7 percent, to settle at $1,365.50 an ounce on Friday. Silver, which had been hitting 30-year highs, dived 5.3 percent to $25.94 an ounce. And copper, which was also rallying to multi-month highs, fell 2.8 percent to $3.91 an ounce.

Meanwhile oil, which has recently neared $90 a barrel in the all-out commodities rally, fell $2.93, or 3.3 percent to settle at $84.88 a barrel. Agricultural futures also took a tumble: After surging to its highest level in 140 years of trading earlier this week, cotton fell 3.4 percent Friday. 
Sugar plunged 10.8 percent, and cocoa fell 3.6 percent.

Treasury yields push higher 
 
Treasury prices fell and yields edged higher Friday as the Federal Reserve began its debt buyback program and concerns persisted over the global economy.

Typically, these two factors would send Treasuries higher because the Federal Reserve's debt purchase program increases demand in the marketplace. And global economic woes should - in theory - increase the demand for the safety of government debt.

But the yield on the benchmark 10-year Treasury note rose to 2.79 percent. The yield on the 30-year long bond was up to 4.29 percent and the yield on the 2-year bond edged up to 0.52 percent. The yield on the 5-year note moved higher to 1.38 percent.

- CNNMoney.com reporters Catherine Clifford, Annalyn Censky and Hibah Yousuf contributed to this report.

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Filed under: Economy
soundoff (9 Responses)
  1. 517blingdongding

    Wow. I am the only dork in america reading about Treasuries on this Friday night.

    November 13, 2010 at 12:19 am | Report abuse |
  2. cesar

    The global economy does what the global economy wants to do. I'm dork #2. Thank you.

    November 13, 2010 at 2:04 am | Report abuse |
  3. phil

    @Cesar...your theory makes it seem as if "the economy" is some sort of creature with free-will. Could be, but until the Federal Reserve is audited for the first time, we will never really know for sure. We ask Congress to allow US to audit them, but ea. year the answer is a resounfing bi-partisan NO! Why? They won't tell US why either.

    November 13, 2010 at 7:00 am | Report abuse |
  4. phil

    Resounding rather

    November 13, 2010 at 7:02 am | Report abuse |
  5. cesar

    Rather resounding.

    November 13, 2010 at 5:49 pm | Report abuse |
  6. G-ma

    I am a dork too, but this is Saturday night. Even worse...?

    November 13, 2010 at 8:55 pm | Report abuse |
  7. CaptainObvious

    I'm not an economics major, so I have no idea what this means. How will auditing the FED help? What non biased agency can be trusted with such a task?

    November 14, 2010 at 11:10 am | Report abuse |
  8. 517blingdongding

    How does one purchase an instrument of debt with another instrument of debt?

    November 14, 2010 at 5:59 pm | Report abuse |
  9. cesar

    @517. I don't know. Ask the Lord for wisdom.

    November 14, 2010 at 8:28 pm | Report abuse |