WASHINGTON -- Treasury bonds posted modest gains yesterday despite more signs of strong economic growth, leaving analysts scratching their heads.
Late yesterday, the 30-year bond was quoted up 11/32 at a price of 94 7/32, pushing the yield down to 8.01% from 8.04% on Tuesday. Notes also managed small gains, with the 10-year ending the day up three ticks at 99 22/32 and a 7.92% yield.
However, the short end of the curve continued to deteriorate: Yields on three-month and six-month bills rose to 5.72% and 6.26%, respectively.
Short-covering may have helped push the long end up, analysts said. But they added it was difficult to find a fundamental reason for the gain in bonds. However, the Commodity Research Bureau index did fall more than a point and the dollar held up relatively well.
Early yesterday, the Commerce Department reported a revision in its third-quarter growth estimate to 3.9% from 3.4%. Soon after, the Federal Reserve said it revised down its capacity utilization estimate for October to 84.6% from 84.9%. However, analysts had expected a bigger downward revision. And the Chicago Purchasing Managers Index grew to 67.4 in November from 64.3 in October. "It beats me why the market went up at all," said Eugene Sherman, director of research at M.A. Schapiro & Co.
Sherman speculated that the market may be beginning to price in another Fed tightening sooner than previously thought. The news that came out yesterday was "bullish for the economy and bearish for bonds," he said.
Treasury Market Yields Previous Previous Wednesday Week Month3-Month Bill 5.70 5.42 5.206-Month Bill 6.22 5.97 5.751-Year Bill 6.86 6.53 6.232-Year Note 7.40 7.18 6.963-Year Note 7.61 7.40 7.185-Year Note 7.78 7.62 7.637-Year Note 7.83 7.69 7.7910-Year Note 7.90 7.79 7.9430-Year Bond 8.00 7.94 8.09
Source: Cantor, Fitzgerald / Telerate
Stats
Stock Market: The Dow Jones Industrial Average rose 0.68 point yesterday to close at 3739.23.
Foreign Exchange: In late New York trading yesterday, the dollar was quoted at 98.94 Japanese yen and 1.5697 German marks.
Commodities: The Commodity Research Bureau's index closed down 1.36 points yesterday at 229.23.
