Most Treasury note and bond prices ended marginally higher yesterday despite the news that manufacturers sold more cars than expected in early June.
Late yesterday afternoon, the 30-year bond was up 1/32 and yielded 7.84%.
Traders said last week's favorable indicators, including a modest 0.1% increase in May consumer prices and a lackluster 0.2% rise in May retail sales, kept the market's firm tone, even though trading flows were minimal all day, as tends to be the case on Mondays during the summer.
"There's no supply, retail [investors are] positioned the way they want to be, the Street has no positions to hedge or adjust, and that's why there's no volatility," a note trader said.
"This was about as boring a day as one could find," said Steven Wood, director of financial markets research at Bank of America. "The summer doldrums are here."
"While the market seems to be hungry for more information about how the economy is doing, it basically ignored the car sales data," Mr. Wood added.
Auto manufacturers sold 186,780 cars made in the United States during the first 10 days of June, up from 166,318 in the same period last year. Because there was an extra selling day this year, on a daily basis, sales rose only 0.2%.
The early June sales equaled a 6.5 million annual sales pace, matching the rate in late May and above the 6.3 million rate that economists had forecast for early June.
The strength in car sales suggests consumers are more willing to spend money than last week's 0.2% increase in May retail sales would indicate.
Mr. Wood said it was encouraging that car sales had come in above a 6 million rate for the third period in a row. "It seems things are perking up out there," he said.
Ronald Glance, a senior vice president at Dean Witter Reynolds, agreed car sales were improving, but said the gains were occurring at a "glacial pace."
"What's interesting is trucks," Mr. Glance said. "Truck sales are at a record pace, and anyone who's just looking at cars is missing the pickup in demand."
He estimated truck sales were running at a 4.7 million annual pace.
Traders said this morning's report on May housing starts might manage to shake the market out of its lethargy.
"After the big start at the beginning of the year, housing has faded and we're waiting to see what kind of momentum there will be," said Kevin Logan, chief economist at Swiss Bank Corp. in New York.
The consensus forecast calls for a 6.5% rise in May starts, to a 1.187 million annual rate. That would reverse some of April's 17% slump, but still leave starts below the levels posted in February and March.
Also this morning, the Federal Reserve will report on May industrial production. The consensus forecast is for a 0.5% rise in output, matching April's 0.5% increase, with capacity utilization rising to 78.8%.
The September bond futures contract closed 1/8 higher at 99 24/32.
In the cash market, the 30-year 8% bond was 1/16 higher, at 101 20/32-101 24/32, to yield 7.84%.
The 7 1/2% 10-year note rose 1/32, to 101 15/32-101 19/32, to yield 7.27%.
The three-year 5 7/8% note was up 1/16, at 100 28/32-100 30/32, to yield 5.52%.
Rates on Treasury bills were mixed, with the three-month bill down two basis points at 3.65%, the six-month bill steady at 3.76%, and the year bill one basis point higher at 3.96%.
Treasury Market Yields
Monday Week Week
3-Month 3.71 3.74 3.68
6-Month 3.86 3.91 3.80
1-Year Bill 4.11 4.18 4.05
2-Year Note 5.00 5.05 5.06
3-Year Note 5.52 5.62 5.66
4-Year Note 6.44 6.54 6.55
5-Year Note 6.45 6.54 6.56
7-Year Note 6.87 6.92 6.92
10-Year Note 7.27 7.30 7.26
15-Year Note 7.55 7.57 7.54
30-Year Note 7.84 7.83 7.81
Source: Cantor, Fitzgerald/Telerate