Bonds Close Little Changed Wednesday After Volatile Session, Wednesday, June 06, 2007 3:50:37 PM

Bonds closed little changed on Wednesday after a volatile session stoked by weakness on Wall Street. The poor showing from stocks caused traders to move their money into the safety of fixed income investments. This took bond prices off a 10 month low that they closed at on Tuesday.

The 10-year yield opened the session higher, pushing closer to the 5.0% level that it has been approaching all week. The early rise came on the release of productivity data for April, which further dispelled the hope that the Fed will be able to cut rates in the near future. However, the yield soon began to decline as stock futures pointed to a lower open. The yield decline intensified with the open on Wall Street, which saw the Dow drop over 100 points during the day.

The retreat lost momentum in the late morning, and the benchmark yield soon returned to the unchanged line, where it remained for the rest of the session. The 10-year yield finished Wednesday`s session at 4.970%, down less than a basis point on the day.

Wednesday morning, the Department of Labor released its revised report on labor productivity and unit labor costs in the first quarter, showing that productivity growth was revised down to 1%, in line with analyst estimates, while unit labor cost growth was revised up to 1.8%, higher than analyst estimates. The upward revision to unit labor cost growth raised some concerns about inflation and the outlook for interest rates.

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