Treasurys Inch Higher On Late-Session Buying
April 26, 2011
U.S. Treasurys edged higher Wednesday as some people stepped in to buy intermediate-dated issues late in the lackluster, seesaw session. The price of the benchmark 30-year bond was up 3/32, or nearly $1.25 for a bond with a face value of $1,000, at 99 15/32 in late trading. The yield, which moves in the opposite direction from the price, inched down to 6.78% from 6.79% late Tuesday. Bond prices spent much of the session meandering in both directions as participants appeared hesitant about where to take the market after Tuesday's steep sell-off. Traders reported some buying of Treasurys, notably five-year notes, as futures trading wound down in New York at 3 p.m. EDT. Although it wasn't clear who the buyers were, traders offered up hedge funds as the likely suspects. Activity, observers noted, was consistent with a quiet summer market. The market was shaken Tuesday on the back of unexpectedly resilient retail sales and consumer price data, with the long bond losing more than a point in price and rising 0.10 percentage point in yield. While Tuesday's retail sales and consumer price reports don't change the consensus view that the Federal Reserve will probably leave interest rates unchanged at next week's Federal Open Market Committee meeting, that conclusion is now far from certain, observers said. The data also leave the door open for a possible tightening at the September policy meeting, they said. ``There was this idea percolating in the market that the consumer is tired and spent out,'' said Jimmy Garry, senior economist at Chase Securities Inc. ''(Tuesday) was the first little hint that back-to-school and August sales are beginning to snap back,'' he said, pointing out that the consumer could wind up spoiling the widely expected scenario for an economic slowdown. Meanwhile, Wednesday's economic indicators -- June business inventories and second-quarter business productivity -- had no noticeable effect on market confidence. June business inventories rose 0.1%. Nonfarm business productivity fell 0.1% during the second quarter, while unit labor costs rose 3.8%. Also Wednesday, the Fed, in a largely anticipated move, bought shorter-term securities after having purchased longer-dated issues in three earlier operations Friday and Monday. In a fourth, and presumably final, coupon pass, the Fed bought securities maturing from February 2012 through July 2013. Coupon passes, in which the Fed buys government securities to permanently add reserves to the banking system, are executed from time to time to offset seasonal liquidity shortages. The first coupon pass by the Fed on Friday caught the market by surprise. Most players weren't expecting this series of purchases to take place until just before the Labor Day holiday. In other credit markets: Corporate debt issuance topped $3.5 billion, as Aetna Services and the World Bank both priced offerings of more than $1 billion. Municipal bond trading quieted some from Tuesday's hectic pace, as continued demand for New York paper helped a $282 million New York state issue sell easily. Mortgage-backed securities inched up, and Freddie Mac announced three new collateralized mortgage obligation offerings.
