Treasuries meandered higher today on negligible volume, driven, market participants said, by optimism that economic data due out later this week will confirm that economic growth is slowing.
Bond prices managed to rise, sending intermediate- and long-maturity yields to six-week lows, even though oil rallied sharply, with negative implications for inflation.
Possibly triggering some purchases of Treasuries,
today increased the bond allocation in its model portfolio to 35% from 30%, while cutting commodities back to zero from 5%.
The benchmark 10-year Treasury note added 9/32 to 102 31/32, trimming its yield 3.8 basis points to 6.126%. Shorter-maturity yields fell by like amounts. The 30-year bond gained 7/32 to 105 5/32, dropping its yield 1.5 basis points to 5.881%. And at the
Chicago Board of Trade
, the September
Treasury futures contract added 6/32 to 97 16/32.
On days like today, when volume is paltry because it's a summer Monday with no economic data, experts counsel against reading much into the market's doings. According to tracker
, just $13.9 billion of Treasuries changed hands by 3 p.m. EDT, 40.2% less than average for a Monday over the past month.
Having said that, some attributed the interest in Treasuries today to hope that this week's major economic reports -- especially May
tomorrow and the May
Consumer Price Index
on Wednesday -- will confirm that consumer spending is slowing and inflation is under control. With that backdrop, people believe, the
Fed can afford not to hike interest rates at its next meeting on June 27-28.
"There's a lot of releases coming out this week, and people's expectations are that they're going to be on the soft side," said Matthew Kuhns, a bond portfolio manager at
Transamerica Investment Management
in Los Angeles. "The market's had a pretty good move and it looks like it's holding in. Greed is overcoming fear in a big way."
The CPI report in particular has the potential to bring more people into the camp that thinks the Fed will stand pat at its next meeting, after having hiked the
fed funds rate by a total of 1.75 percentage points over the last year, said Tony Crescenzi, bond strategist at
. Currently, traders of
fed funds futures put the odds of a hike in the rate from 6.50% to 6.75% at 46%, down from 50% on Friday.
Also of interest to bond traders this week is a speech by Fed Chairman
Alan Greenspan tomorrow at 1:10 p.m. They're wondering if he'll tip his hand regarding the likely outcome of the meeting. Greenspan's topic, "Business data analysis," isn't particularly promising. But hope for guidance lives. "This is a perfect opportunity for the Fed Chairman to set out his thinking in the wake of the run of weaker numbers,"
High Frequency Economics
chief U.S. economist Ian Shepherdson told clients in a published comment this morning.
Currency and Commodities
The dollar fell against the yen and gained against the euro. It lately was worth 106.78 yen, down from 106.90. The euro was worth $0.9527, down from $0.9529. For more on currencies, please take a look at
Crude oil for July delivery at the
New York Mercantile Exchange
rose to $31.74 a barrel, nearly a three-month high, from $30.20, on speculation, arising from a Saudi Arabian official's comment, that next week's OPEC meeting might not do enough to ease the shortage that has driven prices up lately.
Bridge Commodity Research Bureau Index
fell to 224.51 from 224.99.
Gold for August delivery at the
rose to $289.10 an ounce from $286.40.