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Treasury prices ended lower after a day of light trading volume. The long bond again slid more than the others: It finished down by about half a point.

Bonds saw some "safe haven" buying in the early session as equities fell in the aftermath of an unfavorable earnings announcement from technology bellwether

Cisco Systems


. Traders also seemed to be awaiting an $11 billion auction of 10-year notes scheduled for the afternoon before making bigger moves, but retail interest in the eventual sale turned out to be mild.

The benchmark 10-year

Treasury note fell 5/32 to 104 1/32, raising its yield 2 basis points to 5.205%

The 30-year

Treasury bond fell 13/32 to 110 13/32, raising its yield 2.7 basis points to 5.528%

"The market was selling off a bit and causing a steepening of the yield curve," said John Cassady, portfolio manager at

Kent Funds

, adding that the flattening of the yield curve over the last few days had been definitely overdone. (The yield curve, which tracks the yields of notes and bonds, is normally a rising graph -- meaning that long-dated securities typically yield more than short-dated ones. When the yields of the longer-dated securities increase in relation to those of the shorter-dated ones, the curve is said to be steepening.)

He felt that the 30-year Treasury was losing more value than others partly because of an upcoming auction of $10 billion worth of the security. "It was a little bit of this and that. There was some dealer selling due to tomorrow's auction, and the steepening effect played its part as well."

There has been much speculation lately over the future of the long bond, with conflicting suggestions by various subcommittees of the

Bond Market Association

. The security has therefore been subject to greater volatility for the last few days.

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Economic data released this morning didn't do the money market any favors either. Private real estate activity remains strong, and last quarter's productivity was surprisingly high.

"The declining number of hours worked over the fourth quarter played a part in raising the productivity number. Unit labor costs went up

as well, but inflation is really off the investor's radar right now. There is a consensus of inflation being under control," Cassady said, noting that the market didn't react much to the productivity data.

Scanning the economic horizon, he referred to employment figures as influential for bond movement. "Inflation is always going to be important, and then we have the Producer Price Index coming out on the 16th," Cassady added.

"It is mostly going to be investors thinking about where the

Federal Reserve stands. Corporate announcements will also provide anecdotal evidence of how the economy is doing. Any news about cost-cutting measures and layoffs is going to be relevant," he said.

Newly appointed

Treasury Secretary Paul O'Neill

came out in defense of

President's Bush's

proposed tax cut, saying that the $5.6 trillion in projected budget surpluses would make up for the $1.6 trillion lost in tax revenues. He is also hopeful that economic growth will pick up "by the end of the year."

At the

Chicago Board of Trade

, the March

Treasury futures contract was unchanged at 104 11/32.

Economic Indicators

In economic news, the

Mortgage Applications Survey


definition |

chart |


) showed that home purchasing and refinancing activities increased after having dropped during the previous week. The Purchase Index rose to 311.5 from 298.1 in the week ended Feb. 2, while the Refinancing Index rose to 2612.5 from 1992.1. Both indices are calculated from their base values of 100 beginning in 1990.

Low mortgage rates are the reason home-seekers are so active and homeowners are readjusting the financing on their properties. But this robustness in real estate has broader implications as well. Analysts have noted that a recession cannot be possible as long as mortgage activity retains its current good health. Past data have shown that cash freed up by more favorable mortgage terms is often channeled toward consumer purchases.

The report on

productivity and unit labor costs


definition |

chart |


) indicated that productivity of nonfarm workers in the U.S. grew at a rate of 2.4% in the fourth quarter of 2000, down from 3% in the third quarter. Economists polled by


had forecast a rate of 2%. Annual productivity grew at 4.3%, its best showing since a 4.5% spurt in 1983. Unit labor costs, meanwhile, were up sharply in the fourth quarter: They rose by 4.1% -- almost a percentage point higher than the forecast growth of 3.3%.

Higher productivity, which is measured by hourly output, enables companies to turn out more goods at lower cost and suppresses inflation. However, market watchers will be hoping that the unexpectedly high labor costs were due to seasonal factors like shortage of available labor over the holidays, since this measure is directly proportional to inflation.

Currency and Commodities

The dollar rose against the yen and the euro. It lately was worth 116.32 yen, up from 114.76. The euro was worth $0.9281, down from $0.9307. For more on currencies, see


Currencies column.

Crude oil for March delivery at the

New York Mercantile Exchange

rose to $31.27 a barrel from $30.25.


Bridge Commodity Research Bureau Index

rose to 226.15 from 225.93.

Gold for March delivery at the


slipped to $262.80 an ounce from $263.30.