Treasury notes and bonds ended lower after a very slow day of trading. It was so slow that the biggest piece of news in the bond market was a pricing error in the electronic trading system that caused some anxious selling in the morning session. Once the snag was fixed, prices moved more sedately and reacted mostly to the movements in the stock market.
Bonds came back up around midday as stocks lost ground from their rally on Friday. They reversed direction once again in response to a small afternoon recovery in the Dow and
S&P 500, which measures the broad market.
Yields were up marginally at the closing bell, breaking a recent run during which they had been hitting new annual lows every day. Prices and yields move in the opposite direction.
"Basically there was no story and when such is the case, prices tend to fluctuate on the slightest bit of news, which is what happened today," said Casey Colton, bond portfolio manager at American Century Investments. Any activity during such a period, he added, would have an exaggerated effect on prices.
The benchmark 10-year
Treasury note fell 10/32 to 105 7/32, raising its yield 4.2 basis points to 5.056%.
The 30-year
Treasury bond fell 16/32 to 112, raising its yield to 5.428%.
The rest of the week will likely be quiet as many investors stay home in these days between Christmas and the New Year.
Gary Pzegeo, vice president and portfolio manager at Evergreen Investment Management, had similar thoughts about the day's bond activity. "I would have trouble attaching any significance to shifts in data today. The volume was very low and things were by and large reflective of the recent trend," he said, referring to the daily dose of weak economic data. To be sure, both the stock and bond markets have been hit by a rash of economic reports that show the pace of economic growth is slowing.
Today's auction of 3- and 6-month Treasury bills had already been absorbed in the market and made no waves.
The market has lowered expectations the
Federal Reserve will lower interest rates before the next meeting of the
Federal Open Market Committee. Speculation rose last week that the Fed would consider cutting rates between meetings of the FOMC because the economic slowdown has strengthened. Then the tech-heavy
Nasdaq rose 7% on Friday. And momentum in the closing stages of the critical holiday shopping season now has the bond market pricing in a 32% chance of a rate cut before the next FOMC meeting, down from a 44% chance that was priced in last week.
At the
Chicago Board of Trade
, the March
Treasury futures contract fell 7/32 to 105 12/32.
Currency and Commodities
The dollar rose against the yen and fell against the euro. It lately was worth 113.59 yen, up from 112.75. The euro was worth $0.9308, up from $0.9251. For more on currencies, see
TSC's
Currencies column.
Crude oil for January delivery at the
New York Mercantile Exchange
remained unchanged at $25.77 a barrel.
The
Bridge Commodity Research Bureau Index
fell to 228.20 from 228.50.
Gold for February delivery at the
Comex
rose to $275.90 an ounce from $275.50.
