U.S. government securities strengthened today, amid relatively heavy volume, as the stock market continued to be haunted by profit worries and questions about the economy. Traders said the Treasury market continued to be "directionless" in anticipation of next Tuesday's
Federal Open Market Committee meeting, even as most expect the
Federal Reserve to lower interest rates by at least 25 basis points.
Lately, the two-year note, which moves most dramatically to expectations of changes in monetary policy, was unchanged at 100 17/32, with a yield of 3.958%. Yields fall when prices rise, and vice versa. Last week, yields on two-year notes dipped below the 4% mark for the first time since October 1998, when the Fed had to cut rates in the face of a Russia's debt troubles and a worldwide financial panic.
Meanwhile, on the inflation-sensitive long end of the market, the 10-year benchmark note gained 8/32 to 98 14/32, yielding 5.205%, while the 30-year Treasury bond rose 15/32 to 95 30/32, lowering the yield to 5.659%.
"There is generally a bullish bias going into the FOMC meeting, and it's not surprising to see the modest gains," said Michael Ryan, chief fixed-income strategist at
. The strategist also noted that
Alan Greenspan's speech before the
Senate Banking Committee
earlier today varied little from his previous statements.
The markets have been weighing the latest economic data and speeches by Fed officials as clues to the next move. So far this year, Greenspan and his team of central bankers have slashed interest rates five times to 4%.
The Fed chief reiterated today that U.S. inflation remains "relatively stable" and showed no signs of picking up. Nevertheless, he added that "we have to be very careful about any evidence of emerging inflationary instability," according to published reports. Greenspan also said that none of the recent economic data suggest that the long-term gains in U.S. productivity have weakened.