Long-term Treasury prices yesterday regained a firmer tone in quiet trading, following Friday's Federal Reserve easing and the ensuing profit-taking session.
The long bond finished the day up 1/8, to yield 7.92%.
Analysts say continuing confidence in Treasury securities reflects a perception that Friday's 1/2 point reduction in the discount rate and 1/4 point lowering of the Fed
Treasury Market Yields
Monday Week Month
3-Month Bill 5.32 5.40 5.22
6-Month Bill 5.41 5.50 5.40
1-Year Bill 5.53 5.57 5.48
2-Year Note 6.15 6.18 6.18
3-Year Note 6.45 6.53 6.60
4-Year Note 6.60 6.68 6.77
5-Year Note 7.09 7.18 7.30
7-Year Note 7.41 7.52 7.63
10-Year Note 7.61 7.71 7.82
20-Year Bond 7.86 7.92 8.07
30-Year Bond 7.92 7.99 8.10
Source: Cantor, Fitzgerald/Telerate
funds rate will eventually need reinforcing.
The two now stand at 5% and 5 1/4%, respectively.
Jan Hurley, a senior market analyst at Chase Securities, said it is still too early to know whether the Federal Reserve has finished easing for the year.
"I come out on the side that it's more likely we will see lower rates," Ms. Hurley said.
But she predicted Fed officials will wait at least 30 to 60 days before deciding whether another ease is warranted. "So you're going to need new fuel to keep this rally going" in the interim, she said.
Once the market realizes it is in for a wait before seeing whether optimism on interest rates is justified, economic releases could provide the needed impetus.
Ms. Hurley said, for example, that initial unemployment claims and money supply growth will continue to be important indications of where interest rates might be headed over the next few months.
In the near term, the upcoming auctions for two- and five-year notes should start to add supply concerns to the mix of price speculation next week. The Treasury is expected tomorrow to announce the size of the auctions, which settle on Sept. 30.
In keeping with Monday tradition, yesterday's trading activity was said to be very light.
One trader said most retail inquiries came from investors simply wondering where prices were, as opposed to actual buy or sell orders.
Yesterday's only indicator came in about as expected and was ignored by market participants. The Commerce Department reported that U.S. businesses reduced inventories 0.3% in July for the sixth consecutive monthly decline.
The string of reductions was the longest since inventories fell eight months in a row between August 1982 and March 1983.
Today's new data include August's industrial production, which is expected to show a 0.5% increase and last month's capacity utilization, which will be 80%, according to economists surveyed by The Bond Buyer.
Industrial production rose 0.5% in July, and capacity utilization stood at 79.7%.
But today's indicators are not expected to have much market-moving potential. "The big numbers for the month are out of the way," one market participant said, referring to the two price indexes and August's employment report released last week.
The December bond futures contract closed 9/32 higher yesterday at 98 23/32.
In the cash market, the 30-year 8 1/8% bond was 1/8 higher, at 102 5/32-102 9/32, to yield 7.92%.
The 7 7/8% 10-year note rose 3/32, to 101 20/32-101 24/32, to yield 7.61%.
The three-year 6 7/8% note was up 1/32, at 101 1/32-101 3/32, to yield 6.45%.
Rates on Treasury bills were higher, with the three-month bill up three basis points at 5.19%, the six-month bill one basis point higher at 5.21%, and the year bill three basis points higher at 5.26%.