Treasury market participants snored through a mostly uneventful session yesterday, and note and bond prices were mostly lower.
By the end of Tuesday's session, the 30-year bond was quoted down 1/8 point, to yield 6.16%.
Traders said that Monday's quiet conditions continued yesterday. They said the market will most likely remain that way until the Thursday and Friday inflation reports.
Although prices sagged through most of yesterday, the common feeling in the government market is that the inflation reports will give prices a preholiday boost.
"The word on the Street is that the inflation reports look like they will help move Treasury prices higher," said James Kenney, head of government trading at Prudential Securities Inc. "[Yesterday] we saw some short covering, but the tone of the market is still pretty strong."
At one point in the morning, the 30-year bond was more than 1/2 point lower. But losses were mostly recouped during the rest of the day.
Traders said that after noon, though, there were very few large trades to report.
"The trading was Street-oriented profit-taking throughout the morning," said a trader of intermediate securities. "The Street came in short during the morning. Then during the afternoon there was some modest buying, but not very much."
Late in the day, the National Association of Purchasing Management gave the long end a bit of a boost with its 46th semiannual report.
The report forecast that 1994 economic production will grow at a moderate rate of 4.7% and inflation to grow modestly.
Most of the price gyrations in the Treasury market have been in preparation for the November inflation reports.
Although favorable inflation numbers - an increase of 0.2% or less - should key a Treasury market rally at the long end, one economist said that favorable inflationary expectations may already be priced into the long end.
"We may be looking at a new range to trade in," said Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc. "We might be moving into a 6.25% to 6.00% range for awhile."
Flanapn said that although there are still many numbers to be released during December, last week's employment numbers and this week's inflation numbers are the most important events of the month.
But, he said, if the inflation numbers are higher than expected, the price decline could be greater than usual.
Late in the day, the Johnson Redbook weekly report showed that for the week ending Dec. 4, retail sales were down 2.2% from the previous week. But the report also says that sales were 6.5% higher than the same period last year.
The report did not really move the market one way or the other, but it did nothing to sway the positive - if not modest - head of steam the market had built by the end of the day.
This morning, wholesale trade figures for October will be released. The consensus of economists expects the trade figure to be up 0.4% after a 0.6% increase in September.
In futures, the March bond contract ended down 2/32 at 116.05.
In the cash markets, the 4 1/4% two-year note was quoted late yesterday down 2/32 at 100.04-100.05 to yield 4.16%. The 5 1/8% five-year note ended down 3/32 at 100.04-100.06 where the return was 5.08%. The 5 3/4% 10-year note was down 2/32 at 100.13-100.17 to yield 5.67%. The 30-year bond was down 3/32 at 101.02-101.06 to yield 6.16%.
The three-month Treasury bill was down one basis point at 3. 10%. The six-month bill was unchanged at 3.27%. The year bill was up two basis points at 3.44%.
Fed Forex Report
During the third quarter of this year, the Federal Reserve intervened only once in the foreign exchange market, according to an official at the Federal Reserve Bank of New York.
On Aug. 19, the Fed bought $165 million in U.S. dollars for Japanese yen, said Peter R. Fisher, senior vice president and manager for foreign operations of the System Open Market Account.
The intervention took place just after the dollar hit a near record post-World War low against the yen of 100.40 on Aug. 17.
Fisher said the Fed began buying dollars after the Aug. 19 morning release of the June merchandise trade deficit. He said Fed officials "were concerned" about the dollar's dropping below the 100-yen mark.
Following the intervention, the dollar moved to a high of 106.75 yen and closed the day at 105.95 yen.Treasury Market Yields Prev. Prev. Tuesday Week Month 3-Month Bill 3.14 3.15 3.116-Month Bill 3.35 3.30 3.251-Year Bill 3.55 3.49 3.382-Year Note 4.16 4.21 4.073-Year Note 4.47 4.53 4.345-Year Note 5.08 5.15 4.987-Year Note 5.23 5.37 5.1910-Year Note 5.67 5.81 5.6130-Year Bond 6.16 6.29 6.13 Source: Cantor. Fitzgerald/Telerate