Treasury securities surrendered some of the big gains they racked up last week Monday. There was no real catalyst for the move, which happened on very light volume. Profit-taking played a role, as did an explosion in the volume of new corporate bonds expected to be sold this week.
There were no economic releases, and no major releases are scheduled till Thursday, which brings the second-quarter
Employment Cost Index
) and the June
durable goods orders
) report. Accordingly, just $13.4 billion of Treasuries changed hands through 3 p.m. EDT, 22.7% less than average for a Monday over the past month, according to tracker
Alan Greenspan is slated to repeat last week's
Humphrey-Hawkins testimony for the
House Banking Committee
tomorrow. Assuming he makes the identical speech, as he normally does, this appearance is unlikely to provide much new information.
The benchmark 10-year Treasury note was down 8/32 at 103 12/32 in late trading, lifting its yield 6.7 basis points to 6.031%.
Shorter-maturity issues held up somewhat better, as did the 30-year Treasury bond, which fell 12/32 to 106 3/32, hiking its yield 2.5 basis points to 5.816%.
Chicago Board of Trade
, the September
Treasury futures contract shed 8/32 to 98 14/32.
"We had a nice run-up last week, and now people are taking profits off the table," said Michael Maurer, debt strategist at
in St. Louis. The gains were triggered by Greenspan's Humphrey-Hawkins testimony, which was interpreted to mean that the Fed will give the economy the benefit of the doubt when deciding whether growth has slowed enough to leave the
fed funds rate unchanged.
The price action in the Treasury market, limited though it was, verified that the 6% yield level remains a formidable hurdle for the 10-year note to penetrate, in the absence of new information about the pace of economic growth. In other words, investors don't care to buy the 10-year note at yield levels below 6% without reason to believe that the yield will continue to move lower. "It's clearly a resistance area," said Tony Crescenzi, chief bond market strategist at
"For a sustained move to the upside, it's going to take another jolt to the system," in the form of softer-than-expected data on growth, inflation or both, added A.G. Edwards' Maurer.
Meanwhile, in the corporate bond market, expected new issuance for the week spiked to $12 billion with announcements of billion-dollar deals by
Ford Motor Credit
, a unit of
. Over the previous four weeks, an average of $8.9 billion of new investment-grade corporate bonds were issued, according to
. The year-to-date average is $7.4 billion.
Investment-grade bond issuance can put pressure on Treasuries as investors sell Treasuries in order to buy the new corporate bonds.
Issuers are taking advantage of the fact that many people believe the economy is slowing just the right amount, an environment in which high-quality corporate bonds normally perform well, IDEAglobal.com analyst John Atkins said. But confidence in the Fed isn't boundless: Issuers want to sell their bonds before Thursday, when economic data could provide evidence to the contrary. "There's a big rush to get deals done in front of the ECI," Atkins said.
Currency and Commodities
The dollar fell against the yen and rose against the euro. It lately was worth 108.78 yen, down from 108.92. The euro was worth $0.9330, down from $0.9368. For more on currencies, see
Crude oil for September delivery at the
New York Mercantile Exchange
fell to $28.02 a barrel from $28.56.
Bridge Commodity Research Bureau Index
fell to 218.76 from 222.16
Gold for August delivery at the
fell to $279.3 an ounce from $280.60.