Treasury notes and bonds ended higher as investors and traders played out a cheerful prelude to the holidays. Bonds and stocks usually move in a seesawing mode, but today was clearly an exception.
As equities looked upwards for the second day in a row, the bonds were not to be denied their role in the 'Santa Claus' rally. After losing some ground to profit-taking in the morning, bond prices pulled strongly away into positive territory. The yields continued their recent habit of recording annual lows by the day.
The economic data on orders for durable goods and consumers' income and spending came in a little better than expected, but hardly made a dent on the overall perception of a slowing economy. "Ultimately the Fed will be easing interest rates, no doubt about that. But that's not going to happen until the end of January. So for now, the question is how aggressive their comments are going to be," said Bill Kirby, co-head of government bond trading at
Kirby thought the markets would come down next week, since the story about weak earnings and data wasn't going to change. "The bonds are overdone on the upside, and the market will be under pressure and probably come down next week. There are pockets of liquidity out there," he said.
The benchmark 10-year
Treasury note rose 6/32 to 105 18/32, lowering its yield to 5.014%.
Treasury bond rose 9/32 to 112 16/32, lowering its yield to 5.396%.
Gib Clark, head government bond trader at
Zions National Bank
, saw a fair bit of short covering in bonds today and didn't think it was a "happy rally...There was a lot of buying, which was poring in from equity investors. Nobody was selling, so shorts had to be made," he said, adding that the stock market rally should have put more pressure on the bonds, but it didn't.
Chicago Board of Trade
, the March
Treasury futures contract rose 6/32 to 105 19/32.
In economic news, the
durable goods orders
) rose 2.3% in November, more than the 1.6% gain projected by economists polled by
. Excluding orders for expensive transportation equipment, which rose 9.1%, new orders were up 0.4% for the month. The year-on-year growth of durables was 1.0%, a little higher than what was recorded last month but still the second lowest level since Nov. 1998.
personal income and consumption
) for November showed that salaries increased after having gone down in October. Personal Income grew 0.4% while spending increased 0.3%. Consumer spending has been low for the year and, except for a couple of spikes in summer and fall, is back to an unusually low level for year-end. Analysts said the decreasing "wealth effect" and the rise in energy prices had a hand. They also noted that if the stock market keeps declining, we could see a rise in personal savings in the coming year as the consumption growth rate falls below that of income.
Consumer Sentiment Index
chart ) for December dropped to 98.4 from a November reading of 107.6, its lowest level in more than two years.
Currency and Commodities
The dollar rose against the yen and fell against the euro. It lately was worth 112.81 yen, up from 112.31. The euro was worth $0.9238, up from $0.9160. For more on currencies, see
Crude oil for January delivery at the
New York Mercantile Exchange
remained unchanged at $25.77 a barrel.
Bridge Commodity Research Bureau Index
fell to 228.50 from 228.56.
Gold for February delivery at the
slipped to $275.50 an ounce from $275.70.