BOND REPORT: U.S. Treasury Prices Fall As Equities Rise

By Ben Eisen, MarketWatch

NEW YORK (MarketWatch) -- Treasury prices fell Tuesday as equities rose in the U.S. and Europe, sapping some demand from safe U.S. government debt.

The 10-year Treasury note (10_YEAR) yield, which rises as prices fall, climbed 1 basis point to 2.502%.

U.S. futures and European stocks were up after euro zone inflation hit a five-year low, potentially putting pressure on the European Central Bank to ramp up its easing measures.

Market participants also speculated that Pimco was offloading some of its holdings in order to meet redemptions as investors pulled money out of the world's largest bond fund manager. The onslaught of redemptions come in the wake of the high profile departure of chief investment officer Bill Gross. Pimco $3.1 billion Total Return exchange-traded fund (BOND) had a record $446 billion in outflows after Gross left, Bloomberg reported, citing its own data.

The Pimco news pushed U.S. Treasurys weaker on Friday, though the market showed signs of recovery Monday.

On the economic data front, U.S. home prices rose 0.6% in July. Also on the data docket today: the Chicago PMI is set to be released at 9:45 a.m., and consumer confidence data comes out at 10 a.m.

Treasurys could make larger moves as the session progresses, given that large institutional holders of Treasurys may shift at least some holdings, ahead of the end of the quarter.

The 30-year bond (30_YEAR) yield rose a basis point to 3.189% and the 5-year note (5_YEAR) yield rose a basis point to 1.783%.

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