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Tuesday, May 31, 2011 | Nightly Business Report

Nightly Business Report anchors Susie Gharib and Tom Hudson bring you trusted reporting and analysis of Wall Street trends, stock market performance, the economy, and more. Topics: 1. U.S. Government Bond Prices 2. Unemployment Outlook 3. Homebuilder Stocks 4. Luxury Retail Read the full transcript: http://on.fb.me/lpf6iM. SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: U.S. government bond prices continue soaring as investors grow worried about another slowdown in the U.S. economy. Can the bond rally continue? MICHAEL POND, INTEREST RATE STRATEGIST, BARCLAYS CAPITAL: We think the rally is a bit long in the tooth. There still could be some movement down in yields, but we don`t think it`s the great investment out there. TOM HUDSON, NIGHTLY BUSINESS REPORT ANCHOR: Key to kick-starting the economy? Jobs and getting the long-term unemployed back to work. How to get back in the game after six months or more on the sidelines. You`re watching NIGHTLY BUSINESS REPORT for Tuesday, May 31st. GHARIB: Good evening everyone. A bullish day for bonds today. U.S. Treasury prices spiked higher on worrisome housing data. Investor demand for government IOUs pushed the yield on the 10-year bond down to 3.05 percent, that`s its lowest level this year. And, you know, Tom, Treasuries have been on a tear for two months now. HUDSON: Yes, they really have, Susie. And part of the reason may be that investors are keen about bonds now, growing concerns about the U.S. economic recovery. Now since hitting a high of 3.73 percent back in early February, the yield on the 10-year U.S. government bond now closing in on 3 percent. GHARIB: Suzanne Pratt takes a look at what`s behind the run-up in Treasuries and what it means for investors. SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A funny thing has been happening in the bond market lately. "Funny" as in "puzzling," and puzzling because Treasury bonds have been rallying when they`re supposed to be out of favor. But, there are explanations for investors` change of heart. First, U.S. government debt looks far more appealing, relatively speaking, when other large economies face even bigger headaches. Don`t forget Europe has serious sovereign debt issues, and Japan is now in recession thanks to Mother Nature. Bond expert Michael Pond says, secondly, the U.S. economy is downshifting, when it was supposed to be a lot stronger. POND: Investors have also become more concerned about the growth prospects in the very near-term for the U.S. because Q1 was an obvious soft patch. Whether we pick up again is yet to be determined. PRATT: The weaker the U.S. economy, the more likely it is the Federal Reserve will hold interest rates near zero. That means Treasury yields could fall even further, creating more profits for bond investors. Today`s disappointing housing data is more evidence the recovery is still fragile. The S&P/Case-Shiller Home Price Index for 20 large cities fell 0.8 percent in March to its lowest level since the downturn began. Prices are down 33 percent from the July, 2006, peak. Economist Anthony Chan expects the housing market to remain in the cellar, at least until next year. ANTHONY CHAN, CHIEF ECONOMIST, JPMORGAN WEALTH MANAGEMENT: When you look at the share of distressed housing, it`s pretty high, and in that kind of environment with weak labor market conditions, it`s very difficult for housing to rebound strongly. PRATT: So, if you listened to the bond market gurus a few months ago and sold, is it too late to buy back in? Some experts, like Suvrat Prakesh, think Treasuries are still a good bet. SUVRAT PRAKASH, INTEREST RATE STRATEGIST, BNP PARIBAS: When you think about the alternative investments out there, I think you`ve definitely got to have some bonds in your portfolio, because let`s not forget the prospects for stocks looks a little shaky as we approach the end of this current round of quantitative easing. PRATT: Others, however, say if you`re still hungry for bonds, you probably missed most of the latest and unexpected rally. But, clearly bond market experts have been wrong before. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Length: 25:11

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