The Treasury market started Humphrey-Hawkins week with a rally, in spite of a decisive move by oil above the $30-a-barrel level.
Analysts said the market was repairing itself today after last week's selloff, which was due in large part to the cool reception the Treasury's auctions of new notes and bonds got. The action left most yields at their best levels since the week before last.
The benchmark 10-year Treasury note rose 12/32 to 99 22/32, trimming its yield 5.2 basis points to 6.543%. The 30-year Treasury bond, which in recent weeks has been displaced as the market benchmark (because its increasing scarcity has it trading like a commodity), rose 24/32 to 100 15/32, trimming its yield 5.5 basis points to 6.215%.
Chicago Board of Trade
, the March
Treasury futures contract finished up 24/32 at 94 4/32.
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"It looks like we're getting rid of the refunding,"
Treasury market strategist Jerry Lucas said, referring to the process by which the dealers who bought new Treasury notes and bonds in last week's series of auctions move them out to customers.
Unimpressive auction results,
president Jim Bianco pointed out in a research note today, don't necessarily mean the market can't subsequently rally. In fact, over the last 17 years, it has done better in the weeks following the worst auctions than in the weeks following the best ones.
Also, trading desk sources said a single large, determined buyer sparked the move higher early in the session, and the market didn't look back.
As for Humphrey-Hawkins,
semiannual speech to
on the economy and monetary policy is still three days away, but it's the first thing on bond traders' minds this week.
Small wonder. Over the last seven years, the 30-year Treasury bond has moved less than 29/32 (in either direction) on Humphrey-Hawkins day only once, and the average move has been 1 3/32, said Tony Crescenzi, chief bond market strategist at
. Then, in the week after the speech, the market typically moves another full point in the same direction.
Today's turn into positive territory may be based on the hope that "with the stock market slipping, Greenspan won't have an axe to grind," Crescenzi said.
At the same time, bond market participants are anxious for any wisdom Greenspan might have to offer on the implications of the only recently inverted Treasury yield curve, said Roger Bayston, bond portfolio manager at
. The Treasury's plan to reduce issuance of long maturity debt in particular has increased its value relative to short maturity debt. As a result, longer maturity yields are in many cases lower than shorter maturity ones.
To say nothing of the outlook for the March 21
Federal Open Market Committee
meeting. Market participants agree that the FOMC is very likely to hike the
fed funds rate
again. But it's hard to guess by how much, since the Fed heads (whose ruminations
Fed Scorecard can help interpret) have been strangely silent lately. "I would be more comfortable understanding what they're going to do if we had some more information," Bayston said.
There were no major economic releases to give the bond market direction today. But crude oil, which last week renewed its assault on $30 a barrel, a level it hadn't seen in years, finally breached it, with negative implications for inflation.
There were no first-tier economic releases today.
On the lower tier, December
rose 0.5%, a tenth more than expected by economists surveyed by
. The year-on-year pace of inventory growth rose from 4.0% to 4.8%, the fastest since April 1998.
But business sales continue to rise at a much faster pace, suggesting that inventory growth -- a driver of economic growth -- needs to speed up further. Business sales rose 1.1% in December, and the year-on-year pace fell to 9.3% from 10.2%.
This week's economic highlights -- the
Producer Price Index
Consumer Price Index
for January -- are on Thursday and Friday.
Currency and Commodities
The dollar fell against the yen and rose against the euro. It was lately worth 108.78 yen, down from 108.80 on Friday. The euro was worth $0.9803, down from $0.9864 on Friday.
Crude oil for March delivery at the
New York Mercantile Exchange
hit $30.25 a barrel, up from $29.44 on Friday.
Bridge Commodity Research Bureau Index
fell to 212.63 from 214.53 on Friday.
Gold for April delivery at the
fell to $311 an ounce from $313.60 on Friday.