WASHINGTON -- Surging consumer confidence in November and optimistic words about growth from a Federal Reserve governor pushed Treasury security prices lower yesterday.
Prices fell and stayed down despite a strengthening dollar and a Fed coupon pass, in which the central bank buys securities from banks in need of more currency.
After shedding 1/2 point Monday, the benchmark long bond was quoted down 21/32 late yesterday at a price of 93 26/32, pushing the yield back above the psychologically important 8% mark to 8.04%. The 10-year note lost nearly 1/2 point to 99 14/32, bumping the yield up to 7.95%. The short end yesterday lost about the same amount it did Monday, with yields on three-month bills rising 12 basis points to 5.67% and yields on six-month bills rising eight basis points to 6.19%.
At mid-morning, the Conference Board reported that its index of consumer confidence surged to a four-year high of 101.3 in November from 89.1 in October. A few hours later, Fed vice chairman Alan Blinder, making an appearance in Florida, said the U.S. economy looked "extremely strong."
"The market is definitely very cautious right now; cautious markets don't tend to go up," said Steven Wood, director of financial markets research at Bank of America in San Francisco.
"The short-term part of the curve had another pretty bad day," said Don Hays, director of investment strategy at Wheat First Butcher Singer in Richmond, Va.
The market overreacted to the consumer confidence report, Hays said, noting favorable news for bonds yesterday, including falling commodity prices.
Treasury Market Yields Previous Previous Tuesday Week Month3-Month Bill 5.51 5.47 5.146-Month Bill 6.08 6.05 5.651-Year Bill 6.68 6.64 6.132-Year Note 7.33 7.20 6.823-Year Note 7.56 7.52 7.045-Year Note 7.75 7.79 7.477-Year Note 7.78 7.89 7.6310-Year Note 7.86 8.00 7.7830-Year Bond 7.97 8.12 7.95
Source: Cantor, Fitzgerald / Telerate
Stock Market: The Dow Jones Industrial Average fell 1.01 points yesterday, to close at 3738.55.
Foreign Exchange: In late New York trading yesterday, the dollar was quoted at 98.98 Japanese yen and 1.5701 German marks.
Commodities: The Commodity Research Bureau's index closed down 1.13 points yesterday, at 230.59.