Bonds soar, greenback mixed

Treasury prices increase after retail sales report, Federal Reserve minutes allay inflation fears.

April 13, 2005: 9:54 AM EDT

NEW YORK (CNN/Money) - Treasury prices continued to move higher for a second session Wednesday after a weak retail sales report along with Tuesday's Federal Reserve minutes eased inflation fears on Wall Street.

The dollar was mixed in early trading Wednesday after a surprise rally in the prior session.
The benchmark 10-year note gained 3/32 to 97-7/32, lowering its yield to 4.35 percent, down from 4.36 late Tuesday.
The 30-year bond rose 4/32 points to 110-24/32 to yield 4.65 percent, down from 4.66
Tuesday. Bond prices and yields move in opposite directions.
In shorter-dated debt, the five-year note added 3/32 of a point to yield 4.01 percent, while the two-year edged up one tick to yield 3.67 percent.
Retail sales rose 0.3 percent in March, the Commerce Department said Wednesday, but fell short of expectations after a sharp downturn in department store and clothing sales.
Economists surveyed by Briefing.com had forecast a 0.8 percent gain, up from a 0.5 percent hike in February.
Excluding autos, which can swing sharply from month to month, retail sales advanced just 0.1 percent -- the weakest reading since April 2004 -- compared with forecasts for a 0.5 percent gain.
Minutes from the Federal Reserve meeting March 22, released Tuesday afternoon, showed that central bankers are worried about rising inflation but are unlikely to step up the pace of interest rate hikes in the near future.
The transcript was a relief for bond traders, who were bracing for language indicating inflation was more of a problem.
"The minutes appear to show a smaller degree of concern about inflation risks than some may have feared," Tony Crescenzi, chief bond market strategist at Miller Tabak and Co., said in a research note.
"That the risks were to the upside was implied in the statement, but I don't get the sense that there is a major acceleration in the offing," Alan Ruskin, research director at 4Cast Ltd, told Reuters.
The March meeting marked the seventh quarter-point increase since the Fed started raising rates last June. At 2.75 percent, rates are at their highest since right after the terrorist attacks of Sept. 11, 2001.
The bank has been raising its target for short-term rates to ward off inflation, which hurts bonds as it erodes the value of long-term fixed-income investments.
In currency trading, the dollar gained against the euro but drifted lower against the yen after a rally in the previous session.
The euro bought $1.2883, down from $1.2921 late Tuesday, while the dollar bought 107.55, down from 107.69 late Tuesday.

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