The Treasury's 30-year bond nearly breached the 6% level yesterday, but fell back in afternoon trading to yield 6.06%. Early in the day, traders said a major hedge fund was Selling the short end and buying the long end, creating the seeds of a rally.
And new jobless claims came in slightly higher than expected, up 11,000 to 335,000 for the week ended Sept. 18.
Prices ran up, and before noon, EDT, the 30-year bond was up more than 3/4 to yield 6.01%.
President Clinton's health care initiative also helped the market higher, traders said. Whatever the shape of the final plan, most investors took the view that, at least in the short-term, the results will be slower growth and restrained employment.
But within an hour of midday the rally had choked off and prices backed down. The 30-year backed off more than 1/4 to yield 6.06%. Several minor bearish developments and lackluster sentiment rapidly ended the rally, traders said.
Positive developments on the inflation front, for example, were wiped out in the afternoon as the Commodity Research Bureau's index rose 2.31 to 217.49.
An array of commodities were up, boosting the index. While oil futures were down, futures contracts rose on metals. soybeans, coffee and lumber.
Further selling pressure came from new car sales for the 10-day period ending Sept. 20, estimated at an annual rate of 6.9 million units. Traders said the figure was only slightly higher than expectations, but nontheless, helped snuff out the rally.
Big gains were posted by Toyota, up 59% from the same period last year, and Honda, up 35%. Chrylser posted a 42% gain in truck sales.
The price of oil ended up slightly, but volatility was down considerably from Wednesday. Market anxiety about the situation in Russia eased, creating the moderate atmosphere. And rumors that Saudi Arabia would take action to lower production failed to materialize, further depressing the market.
The price of a barrel of West Texas Intermediate crude was up $0.04 to $17.63 in late trading yesterday.
Very late yesterday, surprisingly strong growth in money supply figures hit the intermediate market. Gains of $800 million in M1, $6.5 billion in M2, and $12.5 billion in M3 were all above expectations.
The 5-year Treasury note finished down 9/32 to yield 4.81%, after being in positive territory for much of the day. The 10-year note finished up 1/32 to yield 5.42%.
The story was the same in the futures market. The December contract peaked up 28/32 to 118 26/32 but closed up just 7/32 to 118 3/32.
In the short-term market, yields were mostly unchanged in quiet trading. The Treasury's 3-month note yielded 2.96% in late trading, unchanged on the day. The one-year note was yielding 3.36%, also unchanged.
Looking ahead, today's release of durable goods orders for August is expected to show a 1.5% rise, following July's drop of 3.1%. The expected rise in durables is one factor restraining buying, traders said, and if the number comes in lower, the market should get a boost.
Next week's key economic indicators include home sales on Monday, a revision of second-quarter gross domestic product on Wednesday. and personal income on Thursday.
Alan Greenspan, chairman of the Federal Reserve, will troop up to Capitol Hill next month for Congressional hearings reviewing the Fed.
The House Banking Committee's long-time Fed critic, chairman Henry Gonzalez, will act as master of ceremonies. Gonzalez says he wants to make the Fed more accountable, a prospect that sends chills down the spines of market players who favor an independent Fed.Treasury Market Yields Prev. Prev. Thursday Week Month 3-Month Bill 2.96 3.00 3.056-Month Bill 3.13 3.15 3.171-Year Bill 3.36 3.35 3.322-Year Note 3.90 3.85 3.823-Year Note 4.18 4.14 4.135-Year Note 4.81 4.73 4.777-Year Note 4.98 4.94 5.0310-Year Note 5.42 5.38 5.4130-Year Bond 6.06 6.02 6.09 Source: Cantor, Fitzgerald/Telerate