Bond Focus: Bonds Weaker, but Don't Ask Why

In spite of the abnormal goings-on in the Persian Gulf and Congress, volume has collapsed, making it hard to gauge what's moving prices.
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It's about as quiet as it ever gets in the Treasury market this morning. Prices are lower across the curve, sending interest rates higher. But market watchers say that when there's this little going on, it's dumb to ascribe much significance to price movements.

"It is dead silent," said Mike Cloherty, senior market economist at

Credit Suisse First Boston

, adding that "all the other areas of the floor seem to be just as quiet." By 10 a.m. EST, volume was 66.2% below average for a fourth-quarter Friday, according to tracker



The benchmark 30-year Treasury bond lately was 8/32 lower at 103 12/32, lifting its yield 2 basis points to 5.03%.

Low volume and lack of interest is normal at this time of year, with trading accounts closing their books for the year.

What's not normal at this or any other time of year are a bombing campaign against Iraq underway and the


debating impeachment of the president.

"There are two different reasons why people aren't paying too much attention to either," Cloherty said. "People think the Iraqi situation will end quickly, particularly with

the Muslim holy month of Ramadan starting this weekend." As for impeachment, assuming it passes the House, "once it goes to the


it could take a very long time. There's no obvious date at which this will all come to a head."

To the extent that the weakness in bonds signifies anything, it reflects a drop in the value of the dollar, which is weakening as the prospect of political instability turns foreign investors sour on the U.S. currency. A weaker dollar drags bonds down by lessening their value to foreign investors, and by stoking inflation. The greenback was lately 0.73 yen lower at 115.63.

There are no economic indicators today.