Treasury prices posted modest gains yesterday as the market breathed a sigh of relief after completing this week's series of note and bill sales.
Late in the afternoon, the 30-year bond was up 1/4 point to yield 8.4%.
The price gains occurred despite some unfavorable economic statistics, including a drop in jobless claims and a rise in May personal
Treasury Market Yields
Thursday Week Month
3-Month Bill 5.70 5.72 5.60
6-Month Bill 5.97 6.01 5.86
1-Year Bill 6.28 6.31 6.07
2-Year Note 6.96 6.88 6.59
3-Year Note 7.35 7.33 7.04
4-Year Note 7.53 7.56 7.27
5-Year Note 7.94 7.92 7.65
7-Year Note 8.17 8.17 7.91
10-Year Note 8.29 8.31 8.35
20-Year Bond 8.48 8.50 8.29
30-Year Bond 8.48 8.50 8.28
Source: Cantor, Fitzgerlad/Telerate
income. Traders said the market's resilience showed the improvement in the economy last month was old news.
"The market seems to have discounted the recovery," said Karen Gibbs, a senior futures analyst at Dean Witter Reynolds.
"We don't think the Fed will tighten, because that would endanger the recovery, so policy will be steady," Ms. Gibbs added. "So there's no reason not to work a little higher, to see where resistance is."
Long-term prices softened early in he afternoon, then rebounded on a drop in commodity prices.
The Commodity Research Bureau's index closed 1.24 points lower at 209.99, close to the lows reached in February.
Some traders interpreted the lower commodities prices as an omen that inflation will improve down the road.
But Astrid Adolfson, an economist at McCarthy, Crisanti & Maffei Inc., said the CRB index is two-thirds agricultural products and says more about the outlook for crops than it says about inflation.
Ms. Adolfson prefers to watch the Journal of Commerce index, which tracks more industrial supplies, and she said that measure has not been moving lower. Instead, it has held between 98.5 and 99 through most of June, after trading at an average level of 97.8 in May.
Yesterday's year bill sale, the last of this week's four auctions, went well, with a huge $47 billion of bids entered. The bills came at an average rate of 6% and had improved to 5.97% late in the day.
Yesterday's price improvement probably reflected some relief that the week's auctions were past, traders said. The Treasury sold $54.65 billion of notes and bills this week.
They noted that both the two-year and five-year notes auctioned this week were trading well, with the two-year yielding 6.96%, down from the 7.06% average yield at Tuesday's sale, and the five-year note at 7.94%, down from 7.96% at Wednesday's auction.
The price gains occurred on low volume, and traders said many retail investors were sidelined by quarter-end constraints.
But quarter-end demand probably helped in the bill sector, as portfolio managers bought bills to dress up their balance sheets, they said.
Prices dipped only briefly after the morning indicators.
The Labor Department said 431,000 new claims for unemployment insurance were filed in the week ended June 15, down 17,000 from the week before. And the number of people receiving state benefits dropped 105,000, to 3.514 million, reversing most of the 136,000 jump the previous week.
The jobless claims numbers should have been bad for bonds since since they suggested the labor market may be improving. But the declines were in line with analysts' forecasts and probably were already accounted for in prices.
Later, the Commerce Department said personal income rose 0.5% in May, while personal spending was up 1.1%. The income number was in line with expectations, but spending came in above the consensus forecast of a 0.9% gain.
In April, income rose 0.1% and spending was revised to a 0.4% drop from the 0.1% decline originally reported.
The September bond future contract closed 9/32 higher, at 92 30/32.
In the cash market, the 30-year 8 1/8% bond was 1/4 point higher, at 96-96 4/32, to yield 8.48%.
The 8% 10-year note rose 5/32, to 97 28/32-98, to yield 8.29%.
The three-year 7% note was up 1/8, at 99 1/32-99 3/32, to yield 7.34%.
Rates on Treasury bills were to lower, with the three-month bill down one basis points, at 5.55%; the six-month bill off two basis points, at 5.73%; and the current year bill three basis points lower, at 5.94%.
In other news, a spokesman for the Federal Reserve Bank of New York reported at the weekly press briefing that the nation's M1 money supply rose $4.1 billion to $860.7 billion in the week ended June 17; the broader M2 aggregate gained $4.4 billion, to 3.4 trillion; and M3 increased $3 billion, to $4.2 trillion, in the same period.
Also, for the week ending Wednesday, the federal funds rate averaged 5.79%, almost unchanged from 5.78% the previous week, according to the New York Fed.