Bonds Drift Lower Ahead of Greenspan's Speech

Volume is below average as the market continues to range trade.
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Treasuries are drifting into the weekend already. The bond market is striking a cautious tone this morning, anticipating

Fed

Chairman

Alan Greenspan's

speech this afternoon in Dallas.

Recently the 30-year Treasury bond was down 9/32 to trade at 95 23/32, yielding 5.547%. Volume, predictably, is low:

GovPX

reported only 23% of the usual trading for a second-quarter Friday. Economic data, by and large, is strong again today, but bonds have actually regained a bit of strength since the early

housing starts

and

industrial production

releases. "We're not much better, but slightly better this morning," said Mike Cloherty, senior market economist at

Credit Suisse First Boston

. "There's not a lot of conviction in the Treasury market -- the range mentality has really set in."

Overnight the bond market was lower after selloffs in Japan and Europe.

Treasury Ministry

head

Kiichi Miyazawa

said in parliament Friday that tax cuts may be necessary, which jawboned Japanese bonds lower. But most of the overseas decline can be explained away by position adjustments.

Greenspan is speaking to the

Ambassadors Forum

on technology and trade, so he might not even address the current economic situation. "We've had some dovish comments out of

Fed Vice Chairwoman Alice Rivlin

and hawkish comments from

Fed Governor Laurence Meyer

," Cloherty said. "We're expecting Greenspan to fall right in the middle there, and stick with the balanced risks theme that's been around for a while."

Housing starts fell 1.3% in March, to an estimated 1.766 million in annual starts, the

Commerce Department

reported. February's rate was revised downward to 1.79 million. That's moderation, but as the third-fastest rate of starts in the last 12 years (surpassed only by January and February), it's like saying this year's

New York Yankees

are "just OK."

Building permits

were down more sharply, to 1.64 million from 1.74 million in February.

Industrial production rose 0.1% in March, compared with a 0.3% increase in February, the Federal Reserve said today.

Capacity utilization

declined to its lowest level since June 1992. In March, it fell to 80.1% from 80.3%.