Treasury prices edged lower in quiet trading yesterday in a follow-through to losses that occurred Friday in response to the healthy retail sales report.
Traders said worries about the notes to be auctioned next week were also a factor in the price declines.
Late in the afternoon, the 30-year bond was off 1/4 point, to yield 7.45%, and note prices were off 1/8 to 1/4 point.
On Friday, prices sold off when the retail sales report showed a big upward revision in October as well as a moderate 0.4% gain in November.
Yesterday, prices fell in early New York trading when a bout of selling hit the market.
A government note trader said the selling was probably just a continuation of Friday's declines, especially since trading was curtailed on Friday because of the storm on the East Coast.
There were also rumors that insurance companies were selling intermediate Treasury and mortgage-backed paper to pay claims from this fall's hurricanes.
Prices slowly improved through the morning, then went back to the day's lows during the afternoon.
"Generally, the market's just seeking a level to set up for next week," when the Treasury will auction two- and five-year notes, the head of a Treasury trading desk said. "Until they find it, we'll be under pressure."
A coupon trader agreed that the upcoming supply was a problem.
"It seems investors are pretty much sidelined for the rest of the year, so the dealers will be the only ones bidding on the paper," he said. "They're trying to cheapen it up a little."
At his economic policy conference in Little Rock yesterday, President-elect Bill Clinton said the recent improvement in economic statistics would not change the thrust of his economic plan. Even through the numbers are improving, structural problems still plague the economy, he said.
But, traders and analysts said, nothing said yesterday at the conference had any impact on Treasury prices. The conference, to which hundreds of economists and businessmen had been invited, is not likely to produce any market-moving news today, either, they said.
The Tennessee Valley Authority said yesterday it will sell $1 billion of 30-year bonds in a competitive offering tomorrow, with the funds raised going to pay off some of the agency's short-term debt.
A government bond trader said the TVA deal should not be a problem. "The market should take it just fine," he said. "If there's any area of strength right now, it's the long end."
The bond market will get some news today, including a look at what consumers have been up to from the car sales figures for early December and the weekly Johnson Redbook report on department store sales.
On average, economists surveyed by The Bond Buyer expect a 6.2 million sales rate for early December. That is down from the 7.3 million rate in late November.
The consensus forecast calls for a 0.1% decrease in October business inventories.
The March bond futures contract closed 1/4 lower, at 103 28/32.
In the cash market, the 7 5/8% 30-year bond was 9/32 lower, at 101 28/32-102, to yield 7.45%.
The 6 3/8% 10-year note fell 7/32, to 96 23/32-96 27/32, to yield 6.82%. The three year 5 1/8% note was down 1/8, at 99 16/32-99 18/32, to yield 5.28%.
Rates on Treasury w\bill were mixed, with the three-month bill steady at 3.25%, the six=month bill up one basis point at 3.42%, and the year bill three basis points higher at 3.70%.
Treasury Market Yields
Monday Week Month
3-Month Bill 3.30 3.31 3.19
6-Month Bill 3.50 3.44 3.45
1-Year Bill 3.83 3.67 3.71
2-Year Note 4.79 4.62 4.65
3-Year Note 5.28 5.17 5.20
5-Year Note 6.14 6.05 6.09
7-Year Note 6.49 6.42 6.50
10-Year Note 6.82 6.77 6.87
30-Year Bond 7.45 7.45 7.56
Source: Cantor, Fitzgerald/Telerate