Treasuries Rally as Stocks Fall Amid Florida Stalemate

The Treasury market had a broadly positive day today. The long end did particularly well. The continued stalemate in the U.S. presidential election as votes are recount in Florida is helpful to the bond market, as it suggests an increased likelihood that part of the budget surplus will be used to pay down public debt. This provides a constructive environment for bond prices.

In addition, the bond market benefited from another down day on the equities market. Stocks closed modestly down, following a late-day recovery from a much sharper morning decline.

The benchmark 10-year Treasury note rose 5/32 to 99 26/32, dropping its yield 19 basis points to 5.774%.

The 30-year Treasury bond rose 17/32 to 105 27/32, dropping its yield 35 basis points, to 5.833%.

At the Chicago Board of Trade, the December Treasury futures contract was 15/32 higher at 99 21/32.

"Very little is happening in Treasuries. It's all happening in equities," said Avram Altaras of Bear Stearns. Altaras was not impressed by the market's gains today. "A lot of people were disappointed, and it's hard to make the case that Treasuries will rally from here," he added.

Economic data have been fairly weak in recent weeks, which adds ballast to the belief that the economy is slowing. Indeed, there is some market speculation that the Fed will adopt a more accommodative stance towards monetary policy at its meeting this week. "The Fed might go to a neutral directive, but we don't assign a high probability to that," said Altaras.

The Dow Jones Industrial Average closed down 85 points today, while the tech- heavy Nasdaq Composite Index fell 62 points.

Currency and Commodities

The dollar fell against the yen and rose against the euro. It lately was worth 107.62 yen, down from 107.97. The euro was worth $0.8584, down from $0.8598. For more on currencies, see TSC's Currencies column.

Crude oil for December delivery at the New York Mercantile Exchange rose to $34.50 per barrel from $34.47.

The Bridge Commodity Research Bureau Index fell to 224.20 from 225.44.

Gold for December delivery at the Comex fell to $265.2 per ounce from $265.3.

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