Treasury prices jumped higher at the start of yesterday's New York trading session as hopes for another Fed easing continued to fuel buying.

After that opening surge, activity slowed to a crawl, but Treasury securities managed to hold on to about half their early gains through the rest of the session.

Late yesterday, the 30-year bond was up 1/4 point and yielding 7.99%, marking the first time the long bond has closed below 8% since mid-February.

One reason for the sparse trading

Treasury Market Yields

Prev. Prev.

Monday Week Month

3-Month Bill 5.40 5.47 5.44

6-Month Bill 5.50 5.58 5.60

1-Year Bill 5.57 5.68 5.76

2-Year Note 6.18 6.29 6.46

3-Year Note 6.53 6.63 6.84

4-Year Note 6.68 6.76 6.98

5-Year Note 7.18 7.29 7.46

6-Year Note 7.52 7.62 7.77

7-Year Note 7.52 7.62 7.77

10-Year Note 7.71 7.78 7.94

20-Year Bond 7.92 7.97 8.19

30-Year Bond 7.99 8.03 8.21

Source: Cantor, Fitzgerald/Telerate

was yesterday's Jewish New Year holiday, which intensified the usual Monday inertia.

"It's just deathly quiet," a coupon trader said.

Anthony Karydakis, a senior financial economist at thst National Bank of Chicago, said "the main event that provided the price action was th expectation the Fed was going to ease."

Even though the Federal Reserve failed to signal a change in policy yesterday, "the market still has a good underpinning because of the belief that it'sonly a matter of days before the Fed moves," Mr. Karydakis said.

Traders said the buying that occurred was done mostly by professionals, with little retail involvement.

The market lost some of its fervor after the Fed added reserves with three-day system repurchase agreements late in the morning, a move that analysts said had no policy significance.

Traders said the market has gone as high as it can without further help. Prices are likely to trade sideways until the Fed makes a move or until the market sees the economic numbers due out at the end of the week, including August producer and consumer prices and retail sales, they said.

Amid the bullish hoopla, there were some cautious voices.

A government note trader said the market's performance was not as impressive as its boosters were suggesting.

The market "goes up, but there's no follow-through," the trader said.

He noted that the December bond futures contract faded yesterday after reachinga new high at 98 7/32. "Usually when you make a new high, you get buy stop orders coming in," which push prices higher, the trader said.

From the way the market traded yesterday, "it's just longs passing bonds to longs," which leaves it vulnerable to a sharp sell-off if the Fed disappoints the market or the economic news is unfriendly, the trader added.

This week's inflation indexes loom as another potential problem for the Treasury market. Some analysts expect the core rate of August consumer prices, excluding food and energy prices, to rise 0.4%, following 0.4% increases in both June and July.

The market may explain such stiff increases away. Analysts say the California sales tax hike that took effec in July will be one factor pushing the August core rate higher.

But since the Fed is worried about getting long-term rates lower, an inflation report that upset the long end might bar the Fed from easing policy.

The December bond future contract closed 5/32 higher at 98.

In the cash market, the 30-year 8 1/8% bond was 1/4 point higher, at 101 12/32-101 16/32, to yield 7.99%.

The 7 7/8% 10-year note rose 7/32, to 100 31/32-101 3/32, to yield 7.71%.

The three-year 6 7/8% note was up 1/16. at 100 26/32-100 28/32, to yield 6.53%.

Rates on Treasury bills were lower, with the three-month bill down three basis points at 5.27%, the six-month bill off four basis points at 5.29%, and the year bill five basis points lower at 5.29%.

The weaker-than-expected July consumer credit report gave the market a slight boost yesterday afternoon.

The Federal Reserve said outstanding consumer credit declined by $838 million in July, while June's contraction was revised to $1.7 billion from the $1.8 billion originally reported.

The weakest sector was auto loans, which declined by $880 million in July. The decline in credit suggests weak consumer demand.

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