The futures market ended little changed yesterday as no fresh news arose to inspire trading.
The Treasury market was closed yesterday in observance of the Columbus Day holiday.
The December bond contract ended down 1/32 at 120.20. The Treasury long bond ended unchanged in overseas trading, to yield 5.9 1 %.
Futures prices came under a bit of pressure as increases in gold, silver, and oil prices conspired to push the Commodity Research Bureau's index of commodity prices higher.
The index ended up 0.74 yesterday at 219.18, and provided market participants with the only trading incentive of the day.
Bruce Kamich, technical analyst at MCM Money Watch, said the December bond contract failed to make a run at the contract high of 120.20, which prompted some profit taking. But prices recovered as some players bought on dips below 120.16 in a move to position themselves ahead of the inflation reports this week, Kamich said.
Treasury securities did not trade in overseas markets as events within the European Community diverted attention to bond markets in Germany, Italy, and Spain, traders in London said.
German bund prices benefited at the expense of Italian, Spanish, and French bonds as speculation that the German Constitutional Court may vote against the Maastricht Treaty of European unity today dominated trading. Reports that Germany may reject the treaty created a tremendous amount of volatility in currency markets abroad, which carried over into global bond markets.
"Any trading which took place focused on the European bond markets -- those markets which would be directly affected by Germany's decision to either ratify or reject the Maastricht Treaty," said one trader in London.
"The Treasury market was excluded from price action because of the holiday in the U.S. and a general lack of liquidity in that market." Observers believe U.S. Treasury securities are well poised to extend gains posted last Friday on the back of the September employment report, which supports the view that growth in the labor market and the overall economy remains slow.
While the jobs report did not shed any new light on the state of economic fundamentals, it did calm fears that the economy was gaining steam. Participants embraced the numbers as support for the market at current levels, and participants generally expect Treasuries to remain well bid.
"The employment figures relieved the market and calmed fears of a stronger economy, and there is nothing on the immediate horizon to change things," said Raymond Stone, a managing partner at Stone & McCarthy Research Associates in Princeton, N.J. "I think the market will hold in very well."
Stone said widespread expectations that this week's inflation reports will show that there are few upward price pressures in the economy will keep Treasuries well supported this week.
Wall Street economists polled by The Bond Buyer expect an increase of 0.2% for both the consumer price and producer price indexes. A reading of 0.2% would support the basic message of limited inflation pressure, which is likely to keep the market on a bullish track, analysts said.
The only other economic indicator of importance this week is the retail sales report for September.
Philip Braverman, chief economist at DKB Securities, predicts that sales will be up 0.5% or 0.6%, with and without autos. This, he believes, would be another aberrant and unsustainable sales spike, following respective increases of 0.3% and 0.2% in July and August. That would leave retail sales rising at a mere 2% or less on a real annual rate in the third quarter.