Long End of Treasury Market Battered Following Rate Cut

Updated from 2:25 p.m. EST

Treasury notes and bonds, which had begun to pull back early from the immense gains made yesterday, sold off in furious spurts through the afternoon after the Federal Reserve announced an inter-meeting cut in interest rates. Bond prices stumbled and yields spiked upwards as money traders dissolved their positions, which lately had been overbought on the prospects of a recession.

"It is basically a knee-jerk reaction to the Fed move. People are looking at stocks and saying let's see how far this can go, and in doing so, they are adjusting their holdings in the bonds. But it really is just a reaction," said Avram Altaras, treasury market strategist at Bear Sterns.

The benchmark 10-year Treasury note fell 1 26/32 to 104 15/32, increasing its yield 23.2 basis points to 5.154%. It was its steepest price decrease in 20 months. ...