The Treasury market soared earlier this week, but after today, it's going to want to take its broken wings and learn to fly again. Selling in the morning that was variously attributed to technical factors, the
New York Post
, and fear of
turned into a full-fledged technical breakdown in the afternoon, but the lack of volume today indicates that this move doesn't represent a turn in the market's attitude.
"Basically, the market is down because there are approximately three people in it -- one in New York, one in Chicago and me in Grand Rapids," said Mitch Stapley, chief fixed-income officer at
in the aforementioned Grand Rapids, Mich. "I think you're dealing with a thin summer market, and
the selloff is nothing to lose sleep over."
Lately the 30-year Treasury bond was down 1 1/32 to trade at 102 3/32. The yield rose 8 basis points to close at 5.97%. Traders attributed the late, rapid selloff to a technical breakdown -- the September bond futures contract fell below 115 25/32, which traders identified as a support level (vaguely defined as a place where buyers are expected to buy the market). Buyers didn't show up, so the market sold furiously in the last gasp of the futures session. The contract,
traded on the
Chicago Board of Trade
, closed at 115 20/32. The cash bond market tends to trade in tandem with the futures.
However, an interesting, and constructive occurrence for the market today was the lack of volume. During this prolonged bear market that has enveloped most of the year, the rallies were marked by low activity, while more people seemed to be participating in the down days.
But volume during Wednesday's 1-point rally exceeded $60 billion, compared with today's $40 billion in trading, which is 30% less than on the average third-quarter Friday, according to tracker
. Whether this two-week rally gives out at the end of next week or not, it does indicate that the greater market's conviction has, for a short time, turned positive once again.
The thin trade took everything that could have been an event and turned it into a nonevent. The
New York Post
article this morning suggesting -- no, stating clearly -- that the
has more rate hikes in its pocket. Some in the market said this was putting some pressure on the market, but the
isn't known as a key Fed-watcher. (Maybe it's because this sledgehammer of an article deals solely in black-and-white.
The Washington Post's
Fed-watcher John Berry also wrote a piece today detailing how confused the Fed was in its handling of the June rate hike. Its muddled verbosity dovetails with the Fed's gray, opaque style a little more neatly than does the
New York Post
article is really B.S., so we really don't care," said one trader at a primary dealer today.
Speaking of the Fed, Mr. Big Bad Fed Chairman also didn't
shock the market today, despite a clean admission that stock prices are indeed taken into account when the Fed folks contemplate monetary policy. Greenspan didn't specifically link this revised attitude to either of the two recent rate increases were the result of inflated asset prices -- but said the continued rise in equities in the last five years certainly affected spending habits.
"We no longer have the luxury to look primarily to the flow of goods and services, as conventionally estimated, when evaluating the macroeconomic environment in which monetary policy must function," the chairman said at a conference in Jackson Hole, Wyo.
"The market really expected Greenspan to say something, but he repeated what he has been saying," said Roseanne Briggen, market strategist at
. "He reiterated that he was nervous about asset values."
Today's only major economic release was the monthly personal income and consumption figures, which again let everyone know that the average American is saving less, spending more. However, this report was rather subdued -- personal income rose 0.2% in July, while consumption rose 0.4%. This compares with June's 0.7% increase in personal income and the 0.3% rise in consumption. (
consensus estimates for the July report were 0.5% in both categories).
Analysts expect a few days of meandering early next week ahead of two important economic releases: Wednesday's
National Association of Purchasing Management
survey of manufacturing sentiment for August, and the two-ton behemoth, the August
, released Friday.
"Generally speaking, the market is thinking the
employment number will come in on the soft side," the trader added. The
forecast is for 206,000 in new nonfarm payrolls.