WASHINGTON -- A weakening dollar yesterday prompted Treasury notes and bonds to lose most of Tuesday's gains, analysts said, while the very short end of the yield curve rallied.
Late yesterday, the long bond was quoted down 22/32 --exactly what it gained Tuesday -- at a price of 96 1/8, pushing the yield up six basis points to 7.83%. The 10-year note lost 11 of the 15 ticks it gained the previous day, ending yesterday at 100 15/32, where the yield was 7.80%.
Meanwhile, three-month bills surged, with yields plunging 15 basis points to 5.63%. Six-month bills also gained as yields fell four basis points to 6.54%.
The dollar, which has shown resiliency lately, slipped yesterday against both the Japanese yen and German mark. Analysts said this laid the groundwork for the decline in notes and bonds.
"It's a dollar phenomenon," said Eugene Sherman, director of research at M.A. Schapiro & Co.
Note and bond prices had been bid up to unsustainably high levels on Tuesday, analysts noted. This, they said, is at least partly because of very thin end-of-year trading that tends to exaggerate price movements.
The Commodity Research Bureau index of 21 commodity futures also posted a second straight solid gain, which probably added downward pressure on note and bond prices.
On the other end of the yield curve, bill prices probably rose due to a flight to safety caused by the dollar's decline and the desire of traders to have some Treasurys on their books going into the new year, analysts speculated.
Treasury Market Yields Previous Previous Wednesday Week Month3-Month Bill 5.66 5.60 5.666-Month Bill 6.47 6.44 6.181-Year Bill 7.15 7.01 6.802-Year Note 7.67 7.52 7.383-Year Note 7.73 7.66 7.635-Year Note 7.78 7.74 7.827-Year Note 7.74 7.77 7.8610-Year Note 7.74 7.79 7.9230-Year Bond 7.75 7.84 8.02
Source: Cantor, Fitzgerald / Telerate
Stock Market: The Dow Jones Industrial Average fell 22.20 points yesterday, to close at 3839.49.
Foreign Exchange: In late New York trading yesterday, the dollar was quoted at 99.25 Japanese yen and 1.5447 German marks.
Commodities: The Commodity Research Bureau's index closed up 0.65 point yesterday, at 236.84.