The treasury market traded quietly for most of the season yesterday, ignoring a few new bits of economic information, then posted gains when some buying emerged late in the day.
The 30-year bond ended 1/4 point higher, where it yielded 8.36%, after trading flat for most of the session.
"You saw some big buyers come in" to the futures pit near the close, said Karen Gibbs, a senior futures analyst at Dean Witter Reynolds Inc. Ms. Gibbs said the late-day improvement was significant because it showed how persistant the market's bullishness is.
"Given the strong June home sales and the refunding announcement, the market still wants to go higher," she said, adding that yesterday's close bodes well for further price gains today.
A government coupon trader diagnosed the buying as short covering and said the steady price action this week was disappointing participants who expected the market to sell off as the refunding approached.
"People who are short have to cover," the trader said. "It's not working for them."
The market showed little reaction to yesterday's mixed bag of economic news.
A government note trader said the bigger-than-expected jump in June home sales, which was negative for the bond market, and the stagnant July confidence report, which was favorable for bonds, ended up canceling each other out.
"It was a net wash," the trader said.
Other traders blamed the lethargy on the wait for Friday's July employment report, which would set the market's tone for the coming month, and worries about next week's refunding auctions.
The Treasury will announce the size of the auctions of three- and 10-year notes and 30-year bonds this afternoon.
Economists expect another record refunding, with estimates running from $37.5 billion to $38.5 billion, up from the $37 billion sold at the May auctions.
The economists point out that such a refunding package would raise $15.5 billion to $17 billion of new cash, a figure that is easily covered by the $21 billion in interest payments the Treasury must make in mid-August.
And some economists expect some good news in today's Treasury announcement in the form of a lower figure for this quarter's borrowing needs.
Kathleen Stephansen, a senior economist at Donaldson, Lufkin & Jenrette Securities, estimated that the Treasury will report a borrowing need of $93.7 billion, down from its April estimate of $110 billion to $115 billion.
Ms. Stephansen said the change was due to lower-than-expected spending on the thrift bailout.
"My sense is that [Resolution Trust Corp.) spending is coming in less than the Treasury estimated," she said.
The surprise among yesterday's numbers was the 7.4% jump in June home sales, to a 525,000 annual rate. That was double the consensus forecast, and the Commerce Department also reported upward revisions in both April and May.
Mark Green, an economist at Wells Fargo Bank, said the bigger-than-expected gain in sales suggested "the housing rebound picked up during the second quarter and has good momentum going into the third quarter."
Analysts also pointed to the drop in the quantity of unsold houses as a positive sign. The stock fell to 6.9 months' supply, from 7.5 months in May.
As expected, consumer confidence made no headway in July. The Conference Board's index came in at 77.77%, very slightly below the 78.0% level in June.
In a press release, the Conference Board said the index still suggests a "feeble economy."
"There are no indications of a vigorous rebound," said Fabian Linden, executive director of the board's Consumer Research Center.
The index jumped more than 20 points in March, at the end of the Persian Gulf war, but it has been stuck around the 80% level ever since.
Mr. Green said the fact that confidence has held up since then is impressive, since consumers have seen little concrete evidence of a recovery.
"The fact that we haven't seen consumer confidence slide back any further is actually good news," he said.
The market ignored the second-quarter employment cost report, which showed costs rose 1.2%, matching the increase in the first quarter, as wages increased 1% and benefits jumped 1.5%.
For the year ended in June, costs rose 4.6%, matching the cost for the year ended in March but down from the 5.4% increase for the year ended the previous June.
But Ian Borsook, an economist at Merrill Lynch Capital Markets, said the improvement from the previous year was more apparent than real, because of some special factors that occurred during 1990.
"I don't think there's any sign of real improvement in terms of cost to the firm of compensation to the individual," Mr. Borsook said. "We're still in that 4% to 4.5% range. The recession didn't even help us that much."
The September bond future contract closed 1/8 higher, at 94 16/32.
In the cash market, the 30-year 8 1/8 bond was 7/32 higher, at 97 6/32-97 10/32, to yield 8.36%.
The 8% 10-year note rose 3/32, to 98 22/32-98 26/32, to yield 8.17%.
The three-year 7% note was up 1/16, at 99 17/32-99 19/32, to yield 7.15%.
In when-issued trading, the 6 7/8% two-year note was 1/32 higher, at 100 3/32-100 4/32, to yield 6.80%, and the 7 7/8% five-year note was up 3/32, at 100 10/32-100 12/32, to yield 7.78%. The two notes, which were auctioned last week, will settle today. Rates on Treasury bills were mixed, with the three-month bill down three basis points, at 5.55%; the six-month bill off two basis points, at 5.67%; and the year bill unchanged, at 5.85%.