The long end of the Treasury market led other issues higher yesterday as retail buying emerged to take advantage of higher yield levels.
The 30-year bond was up 18/32 to yield 6.08% late yesterday.
Treasury note prices ended narrowly mixed yesterday as events in Russia subsided and no fresh news arose to give the market direction.
Despite a dearth of news on the U.S. economy and events abroad, prices experienced a tremendous amount of volatility throughout the session. Day-traders bought and sold securities in an attempt to push prices around and prompt others into the marketplace.
"There was a lot of intra-day volatility in the session, but nothing significant occurred," said Fred Leiner, market strategist at Continental Bank.
The long end benefited from funds' taking advantage of higher yield levels brought on by the recent sell-off. The steepening trend of the yield curve continued yesterday as the 30-year bond outperformed other Treasury issues.
A solid performance by the December long bond futures contract directed additional buying toward the long end of the curve. The bond contract had prompted selling in cash bonds in previous sessions as speculative players tested the resolve of the market.
Treasury note and bond prices caught a bid through the morning as retail investors took advantage of attractive buying opportunities at the long end of the curve.
The short end of the market was flat to slightly higher as the turmoil in Russia, which lent support to short-dated Treasuries on Tuesday, lessened.
Dealers said a solid round of note auctions this week provided a modest amount of support for the short and intermediate sectors of the curve.
Treasury prices edged lower early in the session as dealers built a concession into the market ahead of the five-year note auction. The selling was prompted by early talk that the five-year note was somewhat expensive and that retail accounts would only bid in the auction if the issue cheapened up.
The stop-out rate on the Treasury's $11.02 billion of five-year notes at yesterday's auction was 4.83%. The Treasury received bids totaling $30.78 billion and accepted $11.02 billion. That included $532 million of noncompetitive tenders, down from $570 million at the previous five-year note auction on Aug. 25.
The median rate was 4.81%; that is, 50% of the amount of accepted competitive bids were tendered at or below that rate. The dollar price was 99.648 and the coupon rate was set at 4 3/4%. Investors in the New York Federal Reserve District submitted tenders totaling $29.11 billion, of which $10.54 billion, or 95.7%, was accepted.
Marilyn Schaja, money market economist at Donaldson, Lufkin & Jenrette Securities Corp., was encouraged by the market's ability to absorb supply in the face of signs that the economy may be improving.
"The results were close to expectations, and that's good for the market," she said.
The federal government spent $23 billion more money than it collected in August, raising the 1993 budget deficit to $263.4 billion, the Treasury Department reported yesterday. Outlays for August totaled $110 billion, while receipts equaled $86.7 billion, resulting in a budget gap for the month of $23.2 billion.
With 11 months of fiscal 1993 elapsed, the total deficit stands at $263.4 billion. The fiscal year ends Sept. 30, and total figures for fiscal 1993 should be available in about a month. Analysts and the government have said they expect the 1993 deficit to come in lower than last year's record-high of $290.2 billion.
In futures, the September contract ended down 12/32 to 119.10.
In the cash markets, the 3 7/8% two-year note was quoted late yesterday up 1/32 at 99.30-99.31 to yield 3.89%. The 43/4% five-year note ended up 2/32 at 99.28-99.30 to yield 4.76%. The 5 3/4% 10-year note was up 6/32 at 102.12-102.16 to yield 5.41%. And the 6 1/4% 30-year bond was up 18/32 at 102.05-102.09 to yield 6.08%.
The three-month Treasury bill was down one basis point at 2.92%, the six-month bill was unchanged at 3.06%. and the year bill was also unchanged at 3.26%. Treasury Market Yields Prev. Prev. Wednesday Week Month 3-Month Bill 2.96 3.01 3.036-Month Bill 3.13 3.14 3.171-Year Bill 3.36 3.33 3.332-Year Note 3.89 3.84 3.843-Year Note 4.16 4.12 4.185-Year Note 4.76 4.70 4.827-Year Note 4.96 4.92 5.081-Year Note 5.41 5.35 5.4930-Year Bond 6.08 5.97 6.16 Source: Cantor, Fitzgerld/Telerate