A pair of uninspiring economic reports failed to give the Treasury market any clear direction yesterday, and prices spent the day bouncing back and forth within a narrow range.

By late in the afternoon, short-term notes were unchanged on the day and the 30-year bond was off 1/16, to yield 7.91%.

Volume was light because many participants took the day off for the Jewish holiday of Yom Kippur, but traders said they saw the same kinds of activity -- extension trades and buying on dips -- that have characterized the market recently.

The fact that buyers emerge every

Treasury Market Yields

Prev. Prev.

Wednesday Week Month

3-Month Bill 5.31 5.38 5.43

6-Month Bill 5.44 5.48 5.49

1-Year Bill 5.53 5.58 5.56

2-Year Note 6.16 6.20 6.21

3-Year Note 6.44 6.52 6.60

4-Year Note 6.59 6.69 6.77

5-Year Note 7.07 7.19 7.23

7-Year Note 7.39 7.53 7.58

10-Year Note 7.59 7.72 7.77

20-Year Bond 7.85 7.94 8.01

30-Year Bond 7.91 8.01 8.06

Source: Cantor, Fitzgerald/Telerate

time prices go lower has given the market a firm tone.

"Every time the market trades off, it goes right back up," a government coupon trader said. "The price action is extremely good."

And the low level of short-term yields continues to send investors searching for better returns to the long end of the curve.

"People are being pushed out the curve kicking and screaming," said Henry Copeland, a Treasury trader at Bank Julius Baer. "They're buying 10-years and, to a lesser extent, 30-years, and leaving the short end alone."

Traders said upcoming supply also might be affecting demand at the short end.

The Treasury will auction $12.5 billion of year bills today. And yesterday afternoon, the Treasury announced it will seld $13 billion of two-year notes next Tuesday, up from the $12.5 billion it issued in August, and $9.25 billion of five-year notes next Wednesday, unchanged from the amount sold in August.

The two sales will raise $4.2 billion of new cash for the government, as well as replacing $18.06 billion of maturing securities.

Given the lack of interest in short-term paper, prices in that area might retreat ahead of next week's note auctions, Mr. Copeland said.

The market began the New York session by selling off on the mixed August housing starts statistics and a report that U.S. air forces were heading back to Iraq. It barely responded to the day's second indicator, the Federal Reserve's beige book, when it was released at midday, and analysts said yesterday's reports contained little the market did not already know.

In fact, the housing starts numbers came in close to market expectations.

"Starts did a little betetr than expected, and permits did a little worse," said David Wyss, chief financial economist at DRI/McGraw Hill. "The housing market has cooled off a little after a hot spring, but the increase in starts is still an encouraging sign."

Housing starts rose 0.6% in August to an annual rate of 1.06 million units, when the consensus forecast called for a 0.9% decline, and July's increase was revised to 2.4% from the 3.7% reported last month.

The permits component was better news for the bond market. Permits, the most forward-looking part of the report, fell 4.9%, to a 956,000-unit annual rate.

Most of the weakness in permits was for multifamily dwellings; that category plunged 12.3% in August. Mr. Wyss said the August decline suggests the multifamily housing market, which was already quite weak, will get even worse later this year.

At midday, the Fed's beige book, a survey of economic conditions around the country, said the recovery "continues to be uneven."

That echoed the assessment in the last beige book, released in early August, which said the economy was recovering at a "slow, uneven pace."

"It seemed to confirm many of the concerns the Fed has already expressed," said Henry Engler, an economist at Chemical Securities. "It looks as if the only sector of the U.S. economy that's performing well is the industrial sector."

Michael Moran, chief economist at Daiwa Securities, said a couple of the comments in yesterday's report were weaker than corresponding statements in the August beige book.

For example, the comment that there is "little sign of a sizeable rebound in consumer spending" was gloomier than the Fed's August assessment, which called for a "modest recovery" in retail sales during the second half of the year, Mr. Moran said.

He also noted the Fed's remark that "residential investment has lost some of its upward momentum."

The Federal Reserve intervened to add reserves earlier than usual yesterday, but analysts said the Fed's timing did not indicate any change in monetary policy

The December bond futures contract closed 1/8 point lower, at 98 24/32.

In the cash market, the 30-year 8 1/8% bond was 1/16 lower, at 102 8/32-102 12/32, to yield 7.91%.

The 7 7/8% 10-year note rose 1/32, to 101 25/32-101 29/32, to yield 7.59%.

The three-year 6 7/8% note was unchanged, at 101 2/32-101 4/32, to yield 6.44%.

In when-issued trading, the two-year note was bid at 6.19% and the five-year was quoted at 7.11%.

Rates on Treasury bills were mixed, with the three-month bill down one basis point at 5.18%, the six-month bill steady at 5.23%, and the year bill one basis point higher at 5.26%.

Salomon Cuts Holdings

In a filing with the Securities and Exchange Commission yesterday, Salomon Brothers said it has been reducing its securities holdings as part of a program to reinforce its financing.

Treasury traders said there had been speculation that Salomon was disposing of paper gradually. But they said some selling by Salomon was not likely to have much impact on the Treasury market as a whole.

"It's an enormous market," a bond trader said.

A coupon trader said it was possible some of the strength in recent days in intermediate Treasuries could reflect sales of mortgage-backed securities by Salomon, since its mortgage-backed holdings would be hedged by short positions in intermediate securities.

Salomon also said six additional lawsuits have been filed against it, bringing the total to 34.

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