The Treasury market returned from the holiday with a yawn yesterday, and Prices ended narrowly mixed in thin trading.
The 30-year bond ended down 6/32 to yield 6.22%.
As the market enters the last week of 1993, trading activity has virtually ground to a halt. Retail accounts have long since exited the market unwilling to take new bets on Treasuries after a year of impressive returns.
Institutional and bank customers have also pulled to the sidelines to avoid the risk of losses. According to market observers, only short-term day and speculative accounts will be active in the market this week.
Players are waiting to see if the vigor seen in the fourth quarter will carry over into next year, participants said. Until the market gets a better read on that, prices are likely to remain confined to recent ranges.,
"The natural gravitation of the market is to do nothing" said Anthony Karydakis, senior financial economist at First Chicago Capital markets Inc.
Karydakis said the short end of the curve caught a slight bid yesterday on news that the Federal Reserve Board did not vote to raise short-term rates last month. Fed policy makers voted unanimously at their Nov. 16 meeting to hold interest rates steady and to lean neither toward higher nor lower interest rates.
The long end of the curve edged slightly lower as a lack of buyers met with a few sellers of long-dated Treasuries. Traders said some investors moved money into the intermediate sector of the curve, but cautioned against reading too much into the price action.
Cash bond prices came under some selling Pressure as players liquidated March bond contracts in the futures market. Market participants expect a jest of resistance levels this week, Particularly near the 116.23 area.
Fundamentally, market observers remain mixed on whether the Fed will wait until inflations restored stability in the Treasury market and fore tightening credit or boosting rates to head off the chance of higher prices.
Participants said last week's solid round of note auctions restored stability in the Treasury market and helped divert the market's attention from interest-rate policy concerns.
"The market has already factored in stronger growth in the fourth quarter, and now it's more comfortable with that growth," said Mary Dennis, an economist at Merrill Lynch Government Securities Inc. "We should close out the year near current price levels."
The three- and six-month bill auctions drew lackluster demand at average rates of 3.06% and 3.21 %, respectively. The bid to cover ratios were uninspiring at 3.39% for the three-month and 3.16% for the six-month. Noncompetitive bids weighed in at $1.157 billion and $809 million, respectively.
In futures, the March bond contract ended down 1/32 to 116.03.
In the cash markets, the 4 1/4% two-year note was quoted late yesterday unchanged at 100.03-100.04 to yield 4.18%. The 5 1/8% five-year note ended unchanged at 100.03-100.05 to yield 5.08%. The 5 3/4% 10-year note was up 1/32 at 100.13-100.17 to yield 5.67%. And the 6 1/4% 30-year bond was down 6/32 at 100.07-100.11 to yield 6.22%.
The three-month Treasury bill was up one basis point at 3.07%, the six-month bill was up four basis points at 3.24%, and the year-bill was up one basis point at 3.45%.Treasury Market Yields Prev. Prev. Monday week Month3-Month Bill 3.11 3.10 3.146-Month Bill 3.31 3.30 3.331-Year Bill 3.56 3.59 3.532-Year Note 4.18 4.19 4.153-Year Note 4.45 4.53 4.455-Year Note 5.08 5.18 5.067-Year Note 5.21 5.32 5.2310-Year Note 5.67 5.80 5.6830-Year Bond 6.22 6.30 6.16 Source: Cantor, Fitzgerald/Telerate
