Most Treasury prices rose a little yesterday from reports that President Bush was doing better in the polls, but traders said the market's gains occurred in very thin trading.

Late yesterday, the 30-year bond was up 3/8 point and yielded 7.57%.

On Wednesday afternoon, prices rose when Cable News Network reported that its daily poll showed people who were most likely to vote gave Democratic challenger Bill Clinton only a two-point lead over President Bush.

Other polls released yesterday showed Bush's standing was improving but credited Clinton with a bigger lead than CNN did. For example, a Wall Street Journal/NBC News poll showed Clinton leading Bush by 11 points among all the voters surveyed and by seven points among those judged most likely to vote.

Traders said the perception that Bush's chances for re-election were improving had convinced some investors to buy securities.

There was also a sense of relief that the market had gotten through this week's auctions of two- and five-year notes and both issues were trading at a profit from the levels at which they were auctioned, traders said.

But traders and analysts said activity was sparse and likely to remain so for the next few sessions. The uncertainty about the elections and the market's recent gyrations have convinced many participants that the widest course is to refrain from trading until the elections are over, they said.

Jan Hurley, a senior market strategist at Chase Securities, said the thin flows created the opportunity for the violent price swings that occurred earlier this week.

"People get wounded, the market gets thinner, and the swings get more violent," she said. "It's either that or nothing, like watching paint dry."

The market faces a formidable set of hurdles over the next two weeks. After the election Tuesday, dealers have to prepare for the October employment report to be released Friday. The following week the Treasury will auction the quarterly refunding of three- and 10-year notes and 30-year bonds. Economists estimate the refunding package will total $37 billion.

A government bond trader said many participants think the market has sold off too much and expect a bounce once the election is out of the way, no matter which candidate is elected. They would like to stock up on securities in anticipation of that improvement, but the market's recent trading patterns are discourage them, he said.

"You have been rewarded if you wait," the trader said. "Most of the upticks seem to be selling opportunities."

Hurley agrees that Treasury prices will move higher, but questioned whether that will happen immediately after the election. Even though the election results will remove one big source of uncertainty, anticipation of the employment report is likely to paralyze the market by the middle of next week, she said. "There's a pop out there, but I'm not sure the market can't go down again before it pops."

Prices received a temporary lift yesterday morning when the Labor Department said new claims for state unemployment benefits rose 8,000, to 375,000, in the week ended Oct. 17, in line with market expectations. Federal filings fell to 21,418 in the same week from 23,340 the previous week.

The small increase in new claims came after three weeks of declines that pushed claims below the 400,000 level.

Jerry Zukowski, an economist at PaineWebber, said the increase was "modestly positive news" for the bond market. However, he noted that once the federal filings are added into the state number, total claims are still in the 390,000 area seen in late August.

Today's economic news is not expected to have much impact on the bond market. Economists expect this morning's September new home sales to rise a little, offsetting the August decline.

Hurley said this afternoon report on the government's borrowing needs might draw the market's attention. She says the Treasury Department will need to borrow about $75 billion to $80 billion in both the current and first quarters. That fourth-quarter figure is a big improvement over the $110 billion-to-$115 billion range the Treasury originally estimated.

Hurley said that if the fourth- or first-quarter borrowing totals were higher than expected, traders might use it as an excuse to push prices lower.

The December bond futures contract closed 15/32 higher at 103 4/32.

In the cash market, the 7 1/4% 30-year bond was 11/32 higher, at 96 1/32-96 5/32, to yield 7.57%.

The 6 3/8% 10-year note rose 10/32, to 97 24/32-97 28/32, to yield 6.67%.

The three-year 4 5/8% note was up 1/32 at 99 21/32-99 23/32, to yield 4.73%.

In when-issued trading, the 4 1/4% two-year note was 1/32 lower at 99 27/32-99 29/32 to yield 4.31%, down from the 4.37% level at which it was auctioned Tuesday, and the 5 3/4% five-year note was up 2/32, at 99 26/32-99 28/32, to yield 5.77%, down from the 5.84% level at which it was auctioned Wednesday.

Rates on Treasury bills were mixed, with the three-month bill unchanged at 2.94%, the six-month bill off one basis point at 3.18%, and the year bill four basis points higher at 3.35%.

In other news, a spokesman for the Federal Reserve Bank of New York reported at the bank's weekly press briefing yesterday that the nation's M1 money supply fell $1.9 billion, to $1 trillion in the week ended Oct. 19, while the broader M2 aggregate dropped $5 billion, to $3.5 trillion, and M3 fell $16 billion, to $4.2 trillion, in the same period.

The New York Fed also reported the federal funds rate averaged 2.96% for the week ended Wednesday, down from 3.05% the previous week.

Treasury Market Yields

Prev. Prev.

Thursday Week Month

3-Month Bill 2.98 2.98 2.63

6-Month Bill 3.25 3.25 2.80

1-Year Bill 3.46 3.47 2.94

2-Year Note 4.30 4.23 3.68

3-Year Note 4.73 4.77 4.13

5-Year Note 5.77 5.79 5.20

7-Year Note 6.24 6.33 5.75

10-Year Note 6.66 6.75 6.23

Source: Cantor, Fitzgerald/Telerate

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