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Treasuries Cast a Skeptical Eye on Rallying Stocks

Ahead of key economic data later this week, bonds pare small losses to end little changed.

Treasuries ended little changed, except for the 30-year bond, which lost about half a point.

Price swings in the bond don't necessarily reflect shifting market sentiment, a trader said. Liquidity in the issue is so poor that any large trade can cause price swings, he said.

"I don't think there are any huge buyers or sellers of that issue," said Mark Sauvigne, a government bond trader at

Chase Securities

. "So if you get any big trades, it's going to affect it, both ways."

With no major economic data to provide direction, the bond market reacted chiefly to the stock market. The early rally in the stock market put pressure on bond prices. As stocks pared their gains, bonds pared their losses.

The benchmark 10-year

Treasury note, after trading down as much as 9/32 early in the session, ended unchanged at 100 26/32, its yield 5.637%. Shorter-maturity issues were narrowly mixed.

The 30-year bond fell 15/32 to 107 24/32, lifting its yield 3.1 basis points to 5.704%.

At the

Chicago Board of Trade

, the December

Treasury futures contract fell 9/32 to 101 7/32.

The only economic news of the day -- the

existing home sales


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definition |

chart |


) report for October -- was weaker than expected, a positive development for the bond market because it suggests economic growth is slowing. The pace of existing home sales fell to 4.96 million from 5.16 million in September. Economists polled by


had forecast a rate of 5.14 million, on average.

But, as a relatively minor economic indicator, that news did not affect prices in the Treasury market. Instead, bond traders focused on the rally in the stock market and the prospect that

George W. Bush

will be the country's next president.

Recently, the stock market has been the principal influence on the bond market. If stock prices are rising, bond prices typically fall, and vice versa. Bond investors reason that rising stock prices indicate a strengthening economy, necessitating higher interest rates and lower bond prices.

Bond prices fell today as stocks rallied, but market participants observed that the bond market continues to benefit from pain in the stock market more than it suffers when stocks are rallying.

"The bond market is viewing the stock rally skeptically, making very little of it," said Tony Crescenzi, bond market strategist at

Miller Tabak

and CEO of


Meanwhile, the prospect of a Bush presidency weighed on the Treasury market because investors view Bush as likelier than

Al Gore

to change fiscal policy in ways that will lead to smaller budget surpluses. Surpluses are positive for the Treasury market because they lessen the government's need to issue additional notes and bonds. "Gore's felt to be the bigger guardian of the surplus," Crescenzi said.

Economic news due out later this week may provide the Treasury market with the information it needs to break out of its recent trading range. To move decisively higher in price, the market needs reason to believe that the

Fed, at its next meeting on Dec. 19, will

assess the risks to the economy as balanced between rising inflation and slowing growth. The

durable goods orders


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chart |


) for October due out tomorrow and the preliminary third-quarter

gross domestic product


definition |

chart |


) report due out Wednesday may argue in favor of such a move if they contain evidence of weakness.

Currency and Commodities

The dollar fell against the yen and the euro. It lately was worth 110.64 yen, down from 111.34. The euro was worth $0.8512, up from $0.8383. For more on currencies, see


Currencies column.

Crude oil for January delivery at the

New York Mercantile Exchange

fell to $35.38 a barrel from $35.40.


Bridge Commodity Research Bureau Index

rose to 230.68 from 229.87.

Gold for December delivery at the


rose to $270.30 an ounce from $266.70.