Washington - Uncetainty over Orange County's bankruptcy filing and remarks by Federal Reserve chairman Alan Greenspan about continued strong growth pushed Treasury bond prices lower yesterday.
Meanwhile, a flight to quality boosted prices on the short end for a second straight day.
After a hearty rally the previous day, the long bond finished yesterday down about 1/2 of a point at 95 12/32, pushing the yield up to 7.90%. The 10-year note lost 10 ticks at 100 13/32, yielding 7.81%.
Bill prices rose. Yields on three-month bills dropped nine basis points to 5.8% and yields on six-month bills declined eight basis points to 6.43%.
Ongoing developments in the Orange County saga were the primary market force yesterday, with Greenspan's testimony to Congress and release of the Fed's "beige book" acting as secondary factors, said Anthony Karydakis, senior financial economist at First Chicago Capital Markets Inc.
Fears in the municipal market seeped into the long end of the Treasury market, Karydakis said. "The markets don't always complement each other," Karydakis said. "The markets don't always complement each other," he added.
Also, Greenspan told the Joint Economic Committee that the economy continues to post an "impressive performance." And the beige book said higher producer prices are beginning make their way to the retail level.
These events reminded the market of current economic fundamentals, analysts said.