U.S. financial markets moved in tandem yesterday, rising and falling on similar sentiments, but they failed to gain much ground by the end of the thin trading session.
Not unexpectedly, U.S. Treasuries spun their wheels, failing to break free of recent trading ranges as the yield on the long bond hovered around 7.50%. Elsewhere, spreads on investment-grade corporate bonds were little changed from levels seen Friday. Bonds were well bid and action scarce as traders anticipated light dealings to continue throughout this final, vacation-filled week of August.
Prices on corporate junk bonds were unchanged to 1/4 point lower in spots.
Late yesterday, the 30-year U.S. Treasury bond due in 2024 was quoted at 99 31/32, off 5/32 to yield 7.49%.
The U.S. dollar set the pace as it moved higher at the outset of trading. Treasuries quickly picked up the trail.
Market participants had little insight on the cause of the dollar's early climb.
"People were feeling good about things this morning and they're not feeling quite so good this afternoon," said John R. Williams, chief global markets economist for Bankers Trust Co.
"These are very illiquid markets," said Kathleen M. Camilli, chief economist for MFR Inc., a global economic and investment advisory firm.
"If there's ever a time not to over-analyze, it's now," Camilli said. This week "it's just going to be this way. It's hard to make sense of it now."
The dollar ended yesterday at 1.5771 German marks. During the session, the dollar traded up about two pfennigs against the mark from Friday's close, to 1.5940 marks.
"There was a rush to buy dollars at the New York opening," said William V. Sullivan Jr., senior vice president and director of money market research at Dean Witter Reynolds Inc.
"It's a tough call. We're kind of in a news vacuum," Sullivan said, adding that it was difficult to explain the early currency surge.
Unable to hold onto early gains, the dollar slipped and "broke the buck" against the Japanese yen, dropping below 100.00 yen.
However, the dollar finished the session at 100.01 yen.
The personal income and spending report released early in the session of an economic slowdown.
Personal income rose 0.5% in July, while spending inched up 0.2%, the Commerce Department said.
The report suggested that consumers are "spending a little less vigorously" in the second half of the year, Williams said.
Profit-taking ensued on the report and the Treasury bond faltered.
"The market is jittery. People are willing and ready to take profits for any reason," Williams said.
The dollar's advance above 1.5900 marks, close to a six-pfennig climb from levels seen last week, also prompted some investors and dealers to take profits, Sullivan said.
Late in the session, rising commodity prices -- particularly for gold and crude oil -- put pressure on Treasuries, Sullivan and other market analysts said.
The Commodity Research Bureau's commodity price index rose 1.11 to 231.99.
As Treasury and U.S. dollar gains began to erode, it became difficult to distinguish which had caused the other's demise.
"We don't know who's providing leadership anymore. It's sort of like the dog chasing its tail," Sullivan said.
But analysts are putting little stock in the week's dealings, saying that all action and release of economic statistics will serve only as a precursor to the August employment report due Friday.
"We're probably not going anywhere before Friday," Williams said. "After the employment report, they'll forget everything we've seen."
Economists' consensus forecast of a rise in nonfarm payrolls ranges from 203,000 to 258,000. The unemployment rate is forecast to remain at 6.1%.
Meanwhile, most economists are confident that the jobs figures will not cause the Federal Reserve to take any action on interest rates. The Fed is expected to stand firm in its monetary policy directives until the November Federal Open Market Committee meeting, several analysts said.
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