Long-Term Rates Rise, and Stocks Fall - NYT - 6-10-07

By JEFF SOMMER

Published: June 10, 2007

While the markets shifted to a happier note on Friday, the week was a troubling one for many investors, as stock and bond prices fell sharply and long-term interest rates soared.

A stock market rebound on Friday made up for a small portion of the week’s losses, which appeared to have been set off by the remarks of Ben S. Bernanke, the Federal Reserve chairman. He said that inflation remains a threat, echoing language that he and other Fed officials have been using in recent weeks, but nevertheless worrying many traders.

Longer-term interest rates rose, with the yield on the benchmark 10-year Treasury bond breaching the 5 percent level for the first time in nine months, and ending the week at 5.10 percent, up from 4.95 percent the previous week. That rate affects the cost of borrowing for homeowners and corporations alike, and it could slow down the brisk pace of mergers and acquisitions.