U.S. Treasuries ended the day with their reputation as one of the better investment vehicles out there this year quite intact. Prices of notes were up as equities slid after having slogged forward for the week. Yields were close to the lows last recorded in mid-1999.
As the money market pulled down its shutters early this afternoon, traders headed home with memories of a bountiful quarter in bonds. Many spent most of this week adjusting awry positions in their portfolios. They will return on Tuesday for what is expected to be an eventful January.
The benchmark 10-year
Treasury note rose 3/32 to 104 25/32, lowering its yield 1.2 basis points to 5.112%.
Treasury bond fell 8/32 to 111 15/32, raising its yield 1.5 basis points to 5.46%.
"There was hardly any liquidity out there, and treasury volume was way off," said Mitch Stapley, chief fixed income officer at
. In the short term, he is awaiting the resolution, hopefully next week, of California's energy crises.
Reflecting on the strong run of the bond market during the last two months, Stapley asserted that the six-week rally has "back-loaded its performance in 2000." He added that this "makes it tougher for the manager to see where the value in the market is."
"I think the market will focus on high-yield credits for a while," Stapley continued, referring to today's story in
The Wall Street Journal
about prominent investor Warren Buffet buying commercial paper.
Friday's manufacturing reports were mixed but mostly showed a less-than-robust factory output, which would be expected of a slowing economy. Steelmaker
filed for Chapter 11 bankruptcy, adding to the end-of-year gloom. A growing number of companies have lately been going out of business.
Doug Johnston, government market strategist at
, concurred that the government report on unemployment statistics for December, due on Jan. 5th, is the next important piece of information. "That is a big one. We'll see if it connects with the initial jobless claims data," he said. But he feels that unless "something blows up" as far as forthcoming economic data is concerned, the
Federal Reserve will wait until the end of January before announcing interest rate cuts.
Stapley foresees the Fed moving earlier if the current economic slowdown keeps unfolding. "Greenspan might intervene
Federal Open Market Committee meeting with a 25-basis point cut to ease the economic bias to neutral," he said.
Chicago Board of Trade
, the March
Treasury futures contract fell 5/32 to 104 20/32.
In economic news, the
Chicago Purchasing Managers' Index
chart ), the day's most relevant report, rose higher than expected, to 44.7 for December from 41.7 the previous month. Economists polled by
had predicted a reading of 43 for the month. In the larger context however, it remains the index's third consecutive reading under 50 and the fourth under 50 in the last six months. Results under 50 reflect a contraction in industrial production, while readings over 50 reflect an expansion in industrial production.
APICS Business Outlook Index
) for December fell to 45.7 from its 52-week high of 54.9 in November. This national manufacturing index represents a survey of manufacturing firms and signals a factory sector expansion when it is above 50 and a contraction when below it.
It is the business outlook index's lowest reading since June. The gauge showed a decline in almost all of its major components.
Durable goods orders
), excluding aircraft and defense, dropped again, while unfilled orders slipped and current and planned production were down sharply.
) dropped to 75 in November from 79 in October, suggesting a loosening labor market.
Currency and Commodities
The dollar fell against the yen and the euro. At market close it was worth 114.34 yen, down from 114.51 at yesterday's close. The euro was worth $0.9422, up sharply from yesterday's close at $0.9294. For more on currencies, see
Crude oil for January delivery at the
New York Mercantile Exchange
was unchanged at $25.77 a barrel.
Bridge Commodity Research Bureau Index
rose to 228.20 from 226.46.
Gold for February delivery at the
slipped to $273.60 an ounce from $273.70.