WASHINGTON -- Treasury bond prices slumped yesterday as profit-taking and fear of next week's events ultimately eclipsed one of the best wholesale price reports in years. Early in the day, the benchmark 30-year bond surged about two4hirds of a point after the Labor Department reported that producer prices fell 0.5% for the second month in a row in October -- the first back-to-back decline in over three years.
Bond prices crumbled in the afternoon, however, as traders took profits, after two days of modest gains, and few players were willing to sit long going into next week, analysts said.
Late yesterday, the long bond was quoted down 1/2 point at 92 20/32, pushing the yield up to 8.16%. The 10-year note fell five ticks to 99 6/32 and a 7.99% yield. Bills also deteriorated.
One trader described yesterday as a "classic Friday afternoon fade" that happened to come on Thursday because the Treasury market is closed today for Veterans Day.
On Tuesday, the Federal Open Market Committee will hold its next scheduled policy meeting. Most analysts predict that the meeting will result in another half-point increase in the federal funds rate.
What's more, the Labor Department will report October retail sales Tuesday and the Fed will report industrial production and capacity utilization in October. Economists on average predict that both reports will show continued growth in an economy already operating at near full capacity.
James Ho, portfolio manager of John Hancock Mutual Funds, speculated that yesterday's favorable PPI report may ultimately have been detrimental to bond prices because market players became slightly less confident that the Fed would act as expected.
-- Dean Patterson Treasury Market Yields Previous Previous Thursday Week Month 3-Month Bill 5.36 5.22 5.026-Month Bill 5.88 5.76 5.521-Year Bill 6.36 6.26 5.962-Year Note 7.04 6.96 6.613-Year Note 7.39 7.21 6.905-Year Note 7.69 7.63 7.297-Year Note 7.82 7.79 7.4510-Year Note 7.97 7.94 7.6330-Year Bond 8.14 8.09 7.84
Source: Cantor, Fitzgerald / Telerate
Stock Market: The Dow Jones Industrial Average fell 9.76 points yesterday to close at 3821.99.
Foreign Exchange: In late New York trading yesterday, the dollar was quoted at 97.70 Japanese yen and 1.5286 German marks. Commodities: The Commodity Research Bureau's index closed up 0.67 point yesterday, at 233.88.