Bond prices rose modestly on light volume, thanks to sagging stock prices and some soothing words from the
The bond market also continued to benefit from the idea that the next occupant of the White House, no matter who it is, will be ineffectual because of the controversy surrounding the election. If so, that will leave in place fiscal trends that have greatly benefited the bond market. Specifically, the piling up of federal budget surpluses, which has meant greatly reduced issuance of
"People are starting to look past the election to political gridlock," said David Ging, Treasury market strategist at
Credit Suisse First Boston
But the unresolved status of the election also continued to limit trading activity,
government bond strategist Gerry Lucas said. "We're just waiting to see what's going to happen in Florida," Lucas said. "The market's just in limbo."
The only major economic report of the day -- the October
Consumer Price Index
) -- was in line with expectations, and therefore a nonevent.
The benchmark 10-year
Treasury note rose 11/32 to 100 19/32, lowering its yield 4.5 basis points to 5.666%. Shorter-maturity yields fell by comparable increments.
Treasury bond gained 13/32 to 107 6/32, dropping its yield 2.9 basis points to 5.742%.
Chicago Board of Trade
, the December
Treasury futures contract added 8/32 to 100 23/32.
The CPI rose 0.2% in October, and the core CPI, which excludes volatile food and energy prices, also rose 0.2%. Those results were in line with the average forecast of economists polled by
The annual rates of overall and core inflation declined slightly. The overall inflation rate fell to 3.4% from 3.5% in September, and the core inflation rate fell to 2.5% from 2.6%.
More important to the bond market today (to the extent that anything was -- volume as measured by
GovPX was $20.5 billion through 3 p.m. EST, 20.4% less than average for a Thursday over the last month) were the stock market action and the release of the
minutes of the
Federal Open Market Committee's Oct. 3 meeting.
"Stocks have certainly been one of the factors driving the market today," Credit Suisse's Ging said. Falling stock prices can boost bond prices to the extent that people see them as an indicator of future economic activity.
The minutes of the FOMC's Oct. 3 meeting, for their part, gave bond investors reason to hope that at its next meeting on Dec. 19 the committee will change its
assessment of the risks facing the economy. At its latest meeting yesterday, the FOMC maintained the view that the risk of inflation is greater than the risk of an economic slowdown. As long as that's the case, the committee is unlikely to lower the
fed funds rate.
But the minutes of the Oct. 3 meeting reveal that the FOMC is inclined to consider moving to a risks-balanced assessment before the end of the year. "Some
committee members expressed the opinion that those risks were now less decidedly tilted to the upside and that a reconsideration of the sentence might be warranted over the next several months, but they believed that a change at this point would be premature," the minutes say.
Short-maturity Treasuries, which correspond most closely to the fed funds rate, rallied in response to the release of the minutes, Merrill's Lucas said.
In other news, the Treasury Department conducted its latest bond
buyback, purchasing $1 billion of
callable issues maturing between 2010 and 2014.
In other economic news, the
Philadelphia Fed Index
) rose to 5.2 in November from negative 3.8 in October, indicating renewed strength in the manufacturing sector.
Housing Market Index
) rose to 65 in November, the highest level in nine months, from 63 in October.
Initial jobless claims
) fell to 326,000 in the latest week, from the 22-month high of 346,000 they reached the previous week, indicating a tightening labor market. The four-week average rose to 322,250, a 21-month high, from 318,000.
) were unchanged in October as a 0.1% increase in a segment of the CPI offset a 0.1% increase in average weekly earnings as measured by the
Currency and Commodities
The dollar rose against the yen and the euro. It lately was worth 108.99 yen, up from 108.88. The euro was worth $0.8521, down from $0.8570. For more on currencies, see
Crude oil for December delivery at the
New York Mercantile Exchange
fell to $35.12 a barrel from $35.58.
Bridge Commodity Research Bureau Index
fell to 226.00 from 226.83.
Gold for December delivery at the
rose to $266.30 an ounce from $265.60.