The 30-year Treasury bond closed at 7.91% for the third session in a row yesterday, and traders said the fact that prices were standing still summed up the directionless trading that has characterized the market this week.
"People were expecting a lackluster weeks and we've gotten that, and then some," a government note trader said.
Traders said yesterday was another deadly dull session. The market hit its lows in early New York trading, then slowly retraced those losses -- the pattern that has prevailed all this week.
Treasury Market Yields
Thursday Week Month
3-Month Bill 5.33 5.32 5.44
6-Month Bill 5.46 5.39 5.52
1-Year Bill 5.54 5.47 5.61
2-Year Note 6.16 6.11 6.22
3-Year Note 6.41 6.42 6.61
4-Year Note 6.61 6.60 6.76
5-Year Note 7.07 7.08 7.21
7-Year Note 7.40 7.42 7.57
10-Year Note 7.60 7.62 7.77
20-Year Bond 7.84 7.86 7.99
30-Year Bond 7.91 7.91 8.04
Source: Cantor, Fitzgerald/Telerate
"Anybody who sold stuff early probably spent the rest of the day trying to buy it back, because we just kept marching higher," a government note trader said.
The market is consolidating after the Federal Reserve's rate cuts Friday, the trader said. "The question is whether we're consolidating before a move higher or a move lower."
From a technical standpoint, "the trend is still upward, but it's losing momentum," said Mike Krauss, a technical analyst at Lehman Brothers. "If it makes a new high, you should sell it."
The Treasury market will be almost data-free today, suggesting trading will be just as moribund as it was yesterday. The only news is the Philadelphia Fed's survey of local business conditions in September.
Traders said yesterday's indicators were not all that important, even though on the surface they looked good for the economy, and bad for bonds.
The July merchandise trade deficit ballooned to $5.9 billion from a revised $3.8 billion June gap. Imports surged 6.2%, led by an increase in consumer goods imports, while exports rose only 0.8%.
"It's a good sign in that it suggests U.S. domestic demand is beginning to pick up a bit," said Mark Green, an economist at Wells Fargo Bank. "It confirms the economy is recovering at a sluggish pace."
Other analysts pointed out that in a sense, the rise in imports was old news, since it reflected the increase in consumer spending already seen in second-quarter statistics.
"As the consumer sector firmed in the second quarter, inventories were drawn down and importers started to bring in more goods," said Sally Kleinman, a financial markets analyst at Manufacturers Hanover Securities Corp.
Ms. Kleinman said there also seems to be a problem with July's seasonal adjustment factors. Last July, the trade gap jumped to $9.2 billion from $6.3 billion.
"It's not uncommon for there to be very large increases in imports in July and yet the seasonal factors don't account for that," she said.
The fact that new claims for unemployment insurance fell 17,000 to 402,000, in the week ended Sept. 7, suggested that the labor market may be improving. But analysis noted that the week was shortened by a holiday, which may have held down the number of people filing claims.
The report also showed that in the week ended Aug. 31, the number of people on state jobless rolls fell 119,000 to 3.163 million.
Yesterday's auction of $12.5 billion of year bills went well since bids were submitted just as the market approached the day's highs, traders said.
The year bills came at an average discount rate of 5.26%, the lowest rate at a year-bill auction in over 14 years. Many traders contend that the extremely low short-term rates are encouraging investors to place money in longer-term securities.
The December bond future contract close 1/32 higher at 98 2/32.
In the cash market, the 30-year 8 1/8% bond was 3/32 higher, at 102 10/32-102 14/32, to yield 7.91%.
The 7 7/8% 10-year note fell 1/32, to 101 24/32-101 28/32, to yield 7.60%.
The three-year 6 7/8% note was up 1/16, at 101 4/32-101 6/32, to yield 6.41%.
In when-issued tradig, the two-year note to be auctioned Tuesday was bid at 6.20% and the five-year note to be sold Wednesday stood at 7.11%.
Rates on Treasury bills were higher, with the three-month bill up two basis points at 5.20%, the six-month bill up two basis points at 5.25%, and the year bill one basis point higher at 5.27%.
The market showed little reaction to yesterday's money supply figures, which showed M2 bounced back a little from the previous week's plunge, in line with expectations.
In other news, a spokesman for the Federal Reserve Bank of New York reported at the weekly press briefing that the nation's M1 money supply fell $400 million to $866.7 billion in the week ended Sept. 9; the broader M2 aggregate gained $2.6 billion, to $3.4 trillion; and M3 fell $500 million, to $4.1 trillion, in the same period.
Also, for the week ending Wednesday, the federal funds rate averaged 5.44%, down from 5.56% the previous week, according to the New York Fed.