The absence of significant economic statistics yesterday gave way to a session dominated by technical factors as Treasury coupon prices ended slightly lower across the board.
The 30-year bond ended down 3/32 to yield 6%.
Participants could find few reasons yesterday to trade securities ahead of the September employment report, and many accounts stayed out of the market.
The stabilization of events in Russia redirected the market's focus to economic fundamentals, traders said.
The return of calm in Russia allowed bond markets around the world to recoup losses experienced on the back of wild swings in currency prices caused by fears of a military coup in Moscow. Treasury prices opened the session on a firm note as light buying interest in overseas trading carried over into the New York session.
But a lack of follow-through buying and a failed attempt to break above 119.21 on the December futures bond contract erased early gains at the long end of the yield curve.
The short end of the market came under moderate selling pressure on the Treasury Department's announcement that it was increasing its weekly bill auction volume by $2 billion.
The jobs report will provide the market with its first comprehensive view of the economy's performance in September and probably set the tone for trading for the next couple of weeks, traders said.
Estimates for non-farm jobs run the gamut, with some economists predicting that fewer than 100,000 slots were created in September, while others are forecasting an increase of more than 200,000.
Market participants generally expect the figures to show that the economy is expanding, but not fast enough to create jobs or boost inflation. However, with estimates for the report sharply mixed, few investors are willing to place huge bets on the market.
"The employment numbers are the main event this week and the market is poised for range-trading ahead of it," said Matthew Alexy, senior market strategist at CS First Boston.
"Participants are waiting for some kind of catalyst, and the market wants to see if it comes in the form of the employment numbers."
Samuel Kahan, chief economist at Fuji Securities, said the employment numbers and next week's round of inflation reports will either make or break the market's recent rally, which propelled long-term interest rates to their lowest level in 25 years.
"If we get a strong report, people will think we're seeing a burst of stronger activity in the economy, but if we get a weaker report, it will support the market at these levels," Kahan said.
Kahan believes that the producer price and consumer price indexes will have a greater impact on the market because investors are generally more concerned with inflation than with the month-to-month fluctuations in the civilian unemployment rate.
On the economic indicator front, the Johnson Redbook survey reported a 2.4% increase in retailers' sales in September compared with August. The year-over-year gain for September stands at 10.3%.
Meanwhile, August home completions rose 11.3% to a rate of 1.207 million units.
The reports had little impact on the market; growth in both sectors this year has been sporadic.
The market also received word from Federal Reserve officials about the central bank's assessment of current and future economic fundamentals.
New York Fed President William McDonough made some optimistic statements about inflation, as did Fed Vice Chairman David Mullins. In an interview with the Dow Jones Capital Markets newswire, Mullins reiterated the Fed's belief that upward price pressures remain minimal and that growth will weigh in between 2.5% and 3% for 1993. Fed Governor Susan Phillips said yesterday that she expects 2% to 3% real growth in the next few quarters, and she was similarly optimistic about the inflation outlook.
In futures, the September contract ended down 6/32 to 119.07.
In the cash markets, the 3 7/8% two-year note was quoted late yesterday down 2/32 at 100.01-100.02 to yield 3.84%, the 4 3/4% five-year note ended down 2/32 at 100.04-100.06 to yield 4.70%, the 5 3/4% 10-year note was down O1/32 at 103.02-103.06 to yield 5.32%, and the 61/4% 30-year bond was down 3/32 at 103.09-103.13 to yield 6%.
The three-month Treasury bill was up five basis points to 3.01%, the six-month bill also was up five basis points to 3.13%, and the year bill was up three basis points to 3.25%. Treasury Market Yields Prev. Prev. Tuesday Week Month 3-Month Bill 3.01 2.96 2.986-Month Bi 3.13 3.12 3.121-Year Bill 3.25 3.31 3.252-Year Note 3.84 3.79 3.723-Year Note 4.12 4.08 4.035-Year Note 4.70 4.68 4.617-Year Note 4.88 4.86 4.8510-Year Note 5.32 5.28 5.2630-Year Bond 6.00 5.93 5.89 Source: Cantor, Fitzgerald/Telerate