Bonds Clear the Road For Ford

The market has tumbled into negative territory, erasing its early gains.
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The bond market is marginally lower today, having lost all of the gains attained in the early part of the session. Investors and dealers alike were devoted to

Ford's

(F) - Get Report

$8.6 billion brachiosaurus of a bond offering, which today became the largest corporate bond offering ever sold.

Of late, the 30-year Treasury bond was 8/32 lower to trade at 89 15/32. The yield rose by 2 basis points to 6.02%. At 9:41 a.m. EDT, the 30-year bond was up by 15/32 before selling off.

Analysts said the rally lacked conviction because the market's getting ready for important inflation indicators next week in the form of the June

Producer Price Index

and

Consumer Price Index

.

"Next week's numbers are going to be pretty important," said Bill Kirby, co-head of government trading at

Prudential Securities

. "It's a pretty quiet session -- I'd expect activity to be subdued this afternoon."

Ford sold $8.6 billion of securities split into four different maturities. Ford, the parent, sold $1.8 billion of 32-year bonds, while

Ford Motor Credit

, a financing arm of Ford, sold $4 billion in five-year notes, $1.8 billion of three-year floating rate notes, and $1 billion of two-year floating-rate notes. The offering was originally sized at $6.5 billion, increased to $7.5 billion, and again to the $8.6 billion size. The deal surpasses

AT&T's

(T) - Get Report

$8 billion bond deal sold in March -- which was $2 billion greater than any other previous deal.

Speculation was the early Treasury rally was an attempt by some dealers to get ahead of underwriters unwinding corporate rate-lock trades. Underwriters generally sell Treasuries in advance of selling a big corporate offering, just in case bond yields rise in the marketing period. This way they've offset their risk. Dealers then buy back Treasuries once the deal is sold. In these bearish times, rallies have been an opportunity to sell, so Tony Crescenzi, chief bond market strategist at

Miller Tabak Hirsch

, wasn't looking to this activity as a jumping-off point. "If the market is front running that, it makes it difficult to rally later," said Crescenzi. "I don't think there's solid fundamentals backing the rally."

The Treasury market was hit with a bearish report from the Washington-based

National Association for Business Economists

today, which reported that more companies are complaining about skilled labor shortages and are expecting to increase prices in the second half of the year. The NABE's former presidents include none other than

Federal Reserve

Chairman

Alan Greenspan

.

"This is the kind of thing we're going to be up against time and time again," said Crescenzi. "It's not a widely followed survey, but it is a respected group."