Treasuries hit three month high on Europe Fears, US equities Flat

(Bond Market Update for May 7th, 2012) Yield on 10-year notes sunk to a three-month low as demand for safe assets spiked over fears that the new governments in France and Greece may reject austerity plans.

US Treasury Bonds rallied following the win of socialist Francois Hollande, the man who has already pledged to reverse austerity measures initiated by former president Nicolas Sarkozy. Yield on US 10-year bonds changed little at 1.88 percent, though it had touched a low of 1.82 percent during the day’s trade.

The iShares Barclays 20 Year Treasury Bond Fund (TLT) gained 2 cents, or 0.02 percent, to close at $118.16, while the Vanguard Total Bond Market ETF (BND) dropped 3 cents, or 0.04 percent to settle at $83.91.

US stocks wavered between marginal gains and losses Monday with the blue-chip closing lower while the broader benchmarks gaining modestly as investors remained concerned over the recent election outcomes in Greece and France.

The Dow Jones Industrial Average (DJIA) dropped 29.74 points, or 0.2 percent, to 13,008.53, 17 of the 30-component Dow closing lower for the day. PC maker Hewlett-Packard Co (HPQ) led the decliners list, shedding 1.6 percent for the day. Heavy-equipment maker Caterpillar Inc (CAT) lost 1.27 percent while International Business Machine Corps (IBM) shaved 0.60 percent, weighing on the blue-chip index. However, Bank of America Corp (BAC) bucked the trend, adding 2.84 percent on the day while the Walt Disney Co (DIS) rose 2.1 percent after “The Avengers” earned $207.4 millions in revenues in the first weekend.

The S&P 500 Index (SPX) remained flat, gaining 0.48 point, or 0.04 percent, to close at 1369.58 with financials advancing the most and technology faring the worst among the 10 industry groups. Technology outsourcing company Cognizant Technology Solutions Corp (CTSH) dropped the hardest, losing 19 percent after the company cut its 2012 forecast.

The tech-heavy NASDAQ Composite Index (COMP) added 1.42 points, or 0.1 percent, to close at 2957.76 after Apple Inc (AAPL) added 0.8 percent and Google Inc (GOOG) rose 1.8 percent.

Advancers and decliners remained on par on the NYSE.

Crude futures for June delivery slipped 55 cents to close at $97.94 a barrel.

Gold futures for June delivery dropped $6.10 to settle $1,639.10 an ounce.