Long-term Treasury prices declined for the second session in a row yesterday as dealers trimmed their positions ahead of today's August employment report.
Late in the afternoon, the 30-year bond was off 3/8 point to yield 8.09%.
"People are nervous about the [employment] numbers and if they've been long, they want to take some profits," a coupon trader said.
"We went out near the lows of the day," said Scott Winningham, chief market analyst at Stone & McCarthy Research Associates. "I take that to mean the bulls, those with the long positions, were a little more scared than the bears."
Economists surveyed by The Bond Buyer on average expect a 25,000 increase in August nonfarm pay-rolls, accompanied by a small increase in the unemployment rate to 6.9%, from 6.8% in July.
Analysts said an increase in payrolls of 100,000 jobs or more would kill hopes for another Fed easing and cause a sharp sell-off.
But several analysts said that if the employment report is in line with expectations, the weight of long positions may keep prices from improving much.
"The market is vulnerable to a sell-off almost regardless of whether it's a good number or a bad number," said Steven Wood, director of financial markets research at the Bank of America.
Mr. Wood said both retail investors and the dealer community had stocked up on Treasury securities.
"If the market popped up on a weak report, there would be a number of people who would come in to take profits," he said.
The market got a slew of statistics and news items yesterday, and traders seemed to focus most on the negative news, including remarks by two Fed policymakers.
Yesterday morning, Federal Reserve Governor John LaWare said the economy is recovering and that he expects 3% to 4% growth during the second half. And during the afternoon, San Francisco Fed President Robert Parry said it was important for the Fed to keep in mind its anti-inflation stance while the economy is at this turning point.
"Both of them were kind of up-beat on the economy, which might be a bit disconcerting to people who think the Fed is close to easing," Mr. Winningham said.
Late in the afternoon, prices hit session lows when the money supply statistics showed more strength than expected. The weakness in the monetary aggregates has been one of the main reasons people expected the Fed to ease.
A spokesman for the Federal Reserve Bank of New York reported at the weekly press briefing that the nation's M1 money supply rose $5.3 billion to $869.9 billion in the week ended Aug. 26; the broader
Treasury Market Yields
Thursday Week Month
3-Month Bill 5.58 5.44 5.51
6-Month Bill 5.60 5.52 5.64
1-Year Bill 5.71 5.65 5.79
2-Year Note 6.32 6.32 6.49
3-Year Note 6.68 6.57 6.89
4-Year Note 6.79 6.70 6.98
5-Year Note 7.34 7.25 7.52
7-Year Note 7.65 7.57 7.82
10-Year Note 7.83 7.74 7.97
20-Year Note 8.04 7.93 8.21
30-Year Note 8.09 8.00 8.22
Source: Cantor, Fitzgerald/Telerate
M2 aggregate gained $6.4 billion, to $3.4 trillion; and M3 increased $4.9 billion, to $4.2 trillion, in the same period.
The market seemed to pay little attention to some more favorable news, including the soft car sales. Auto manufacturers sold vehicles at a 6.2 million annual rate in late August, putting the month's sales at a 6.1 million unit pace. That is down from 6.8 million in July.
The December bond future contract closed 1/4 lower at 97.
In the cash market, the 30-year 8 1/8% bond was 7/16 lower, at 100 7/32-100 11/32, to yield 8.09%.
The 7 7/8% 10-year note fell 7/32, to 100 4/32-100 8/32, to yield 7.83%.
The three-year 6 7/8% note was down 1/8, at 100 14/32-100 16/32, to yield 6.68%.
Rates on Treasury bills were mixed, with the three-month bill up one basis point at 5.34%, the six-month bill steady at 5.38%, and the year bill two basis points higher at 5.41%.
Also, for the week ending Wednesday, the federal funds rate averaged 5.60%, up from 5.52% the previous week, according to the New York Fed.