Treasury prices fell slightly yesterday, after a handful of economic releases offered no clear direction on the shape of the economy.
The long bond flipped back and forth between positive and negative territory during the day and finished the New York session down 1/8 point, to yield 7.35%. Note prices were off as well, and rates on bills were mixed.
The market dropped slightly early in the day after the Commerce Department announced a plunge in durable goods orders in November. Orders fell 1.9% last month, more than most analysts had predicted. But a closer look at the figure showed much of the drop came from the transportation sector. Excluding that sector, orders rose 1%, more in line with expectations.
While that news was somewhat bullish for the market, later indicators were offsetting. The Commerce Department announced that personal income rose 0.2% last month, while personal consumption increased 0.5%.
The income numbers were dampened somewhat by special factors, including government restitution payments in October to Japanese Americans for internment during World War II. Excluding such onetime factors, the figure rose 0.8%.
Maury Harris, chief economist at PaineWebber Inc., said the day's indicators seemed to offer conflicting signals on the economy, "so they washed each other out."
Steve Slifer, a money market economist at Lehman Brothers, added: "The market was trying to figure out the numbers and couldn't come to any conclusion one way or the other. There's really no reaction to any of the data any more than a tick or two in either direction."
Adding to the uncertainty were the extremely thin pre-holiday trading levels, which can have the effect of exaggerating price movements and often keep would-be participants sidelined.
Despite the end of a rally that brought the yield on the bond down about eight basis points from last week, Slifer said the fundamental positive tone remains intact.
"People are becoming more comfortable with the idea that growth is going to be subdued next year, and it's not going to trigger a pickup in inflation," Slifer said. He added that President-elect Bill Clinton's Cabinet nominees have calmed market fears that the new administration would plot a radically different economic course for the nation.
Figures on auto sales for the Dec. 11-20 period showed strength yesterday. Ford's sales were stronger than expected, rising 24.2%. to 37,823 cars from 30,447 during the same period last year. General Motors fell about 2.6% from last year, to 49,222. But GM's truck sales improved slightly.
Market sources said yesterday's five-year note auction did not go as well as expected, with $11.25 billion awarded at 6.03%. The median bid was 5.97%, indicating a wide range, and the bid cover was 2.17 times.
In late trading yesterday, the notes were priced to yield 6.03%. The two-year notes auctioned Tuesday were priced to yield 4.65%.
The March futures contract closed 6/32 lower, at
In the cash market yesterday, the 7 5/8% 30-year bond was 1/8 point lower, at 104 5/32-103 9/32, to yield 7.35%.
The 6 3/8% 10-year note was off 6/32 at 97 28/32-98/32, to yield 6.65%.
The three-year 5 1/8% note was unchanged, at 100 3/32-100 5/32, to yield 5.06%.
Rates on Treasury bills were mixed, with the three-month bill down three basis points at 3.18%, the six-month bill unchanged at 3.31%, and the year bill also steady at 3.48%.
Today, the market will see initial unemployment claims for the week ended Dec. 12. Slifer said he expects the figure to fall 10,000 to 15,000, but said that is unlikely to produce much price action, especially since so many players will be sidelined early for the Christmas break.
Treasury Market Yields
Wednesday Week Month
3-Month Bill 3.23 3.27 3.29
6-Month Bill 3.39 3.42 3.52
1-Year Bill 3.60 3.69 3.73
2-Year Note 4.64 4.60 4.69
3-You Note 5.06 5.13 5.20
5-Year Note 6.01 6.03 6.11
7-Year Note 6.35 6.39 6.47
10-Year Note 6.65 6.74 6.82
30-Year Bond 7.35 7.42 7.53
Source: Cantor, Fitzgerald/Telerate