Treasuries were mixed at the end of another day of quiet trading. The notes dropped marginally in price for the third session in a row while the long bond gained ground after going through some consolidation earlier in the week. Traders took the latest economic results in stride since the overall picture came out no different. Yields were a little higher from their levels of yesterday.
"With the small number of people at work, the trading is very thin. I don't think one can read anything in the Treasury data today," said Victor Thompson, head of fixed income securities at
State Street Global Securities
The benchmark 10-year
Treasury note fell 5/32 to 104 21/32, raising its yield 1.4 basis points to 5.13%.
Treasury bond rose 8/32 to 111 26/32, lowering its yield 1.9 basis points to 5.439%.
The bond market has been lately shuffling to equity performance and as stocks continued on a positive note, bonds once again took their cue accordingly. There may have been a small time-out, as some cheer in the weekly employment report interrupted the story of an increasingly frail economy.
Regarding the surprising drop in jobless claims filed last week, Thompson was skeptical. "There is a fairly powerful unemployment trend in place and companies are having a hard time. Many will have to shed costs, and labor remains one of their most expensive items in that respect."
Attention therefore remains on when the
Federal Reserve will act. Thompson isn't going with the prevalent thinking that an intervening interest rate cut, before the
FOMC meeting in the end of January, is all but certain.
He theorizes the Fed will like to see "a little more pain" before acting out of sequence. "It will wait until the market becomes overextended and a few more companies declare bankruptcy. The Fed doesn't want the investors assuming they can be bailed out at the earliest signs of weakening, especially after the string of bad investments that have been made over the last couple of years."
Thompson could well be right. The last time the central bank cut rates in response to weak economic data was way back in 1990-1991.
Thompson does believe though that the Fed will move aggressively when it finally does swing into action. "January 31 remains the most important date next month. And I would like to see a 50-basis-point rate cut, as that is justified," he added.
Analysts are generally of the opinion that January 5, when the government releases the December employment statistics, is the day to watch for. Most think the Fed will drop strong hints of what it intends to do well before the month is over.
Chicago Board of Trade
, the March
Treasury futures contract slid 1/32 to 104 25/32.
In economic news, the
Mortgage Applications Survey
), the release of which had been delayed by a day, detected an increase in refinancing and a decrease in new mortgage activity as mortgage rates remained low. The Refinancing Index rose to 794.1, closer to its previous peak recorded in May 1999. The Purchase Index slipped to 278.2, its lowest level since February.
Initial jobless claims
) fell much more than expected. First-time claims for unemployment insurance fell to 333,000 from 356,000 the previous week. However, 18 of the states have turned in estimated data, so the revised number may be closer to the
estimate of 351,000. The four-week average fell to 340,750 from 347,750.
Existing home sales
) rose more than expected to 5.22 million in November from 5 million in October. Economists polled by
had forecast a drop to 4.9 million for the month. Current mortgage rates, at their lowest level since May 1999, have been helping the housing market. Home sales trigger purchases of durable goods like home appliances and furniture, and are therefore significant.
Consumer Comfort Index
chart ) remained at 27%, 11 points lower than its twelve-month high but not far below its 12-month average of 29%. Buyers lining up for last-minute gifts have kept the number steady.
Consumer Confidence Index
) fell more than forecasted to 128.3, its lowest level since December 1998. The
poll had reflected similar sentiments in pegging it at 128.7. Economists watch this index closely due to its influence on consumer spending, which accounts for two-thirds of the
gross domestic product
Currency and Commodities
The dollar rose against the yen and the euro. It lately was worth 114.45 yen, up from 114.29. The euro was worth $0.9298, down from $0.9304. 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
slipped to 228.56 from 228.90.
Gold for February delivery at the
fell to $273.70 an ounce from $276.90.