US Treasuries inch higher in boost from Europe
Mon Nov 21, 2005
By Ros Krasny
CHICAGO, Nov 21 (Reuters) - U.S. Treasury debt prices rose on Monday, but stayed within recent ranges as a holiday-shortened week with little first-tier data got under way.
Early action was dominated by positioning against European rates after the president of the European Central Bank backtracked on hawkishly construed comments from Friday.
The ECB's Jean-Claude Trichet on Monday suggested the bank did not plan to make a possible December rate increase the opening salvo in a series of rate hikes, as some had feared after his remarks on Friday.
Eurodollar futures, which took a hit from Trichet's Friday comments, rebounded strongly.
The 10-year Treasury note rose 8/32 in price for a yield of 4.46 percent, down from 4.50 percent on Friday. Trading is likely to be subdued unless the benchmark yield breaks out of a 4.41 percent to 4.50 percent band.
The week's major release should be minutes from the Nov. 1 Federal Open Market Committee meeting, due on Tuesday.
"With 300 basis points of tightening actions in the past 16 months, market participants continue to look for clues from FOMC policy-makers as to when an end to the current tightening cycle might be in sight," said Glenn Haberbush, economist at Mizuho Securities.
Chicago Fed President Michael Moskow will speak on the U.S. economy at 5:30 p.m. EST (2230 GMT) and is likely to stick close to his comments from Nov. 15, which gave little sign that the Fed was thinking of halting its program of rate hikes barring a collapse in the housing market.
In Monday's only data of note, the Conference Board's leading economic indicators report rose by 0.9 percent in October, a touch more than expected, but the September index was revised down to a negative 0.8 percent.
October's increase was the first in four months, although pundits said the move was mostly showed a rebound from Hurricane Katrina.
"The leading indicators are in a gently slowing trend ... this suggests that the pace of economic growth should also slow gradually over the next 3 to 6 months," said Steven Wood, economist with Insight Economics.
The Treasury announced a $20 billion two-year note auction for Wednesday, the sixth consecutive monthly auction of that size and a mild surprise to dealers who had anticipated a jump to $22 billion.
Market participants will focus their attention on the indirect bidder percentage at the auction to see how strong demand is from outside the dealer community, and especially from overseas banks.
The 30-year bond rose 13/32 to yield 4.66 percent, down from 4.68 percent. Five-year Treasury notes were up 5/32 at a yield of 4.39 percent, down from 4.44 percent. Two-year note yields were at 4.36 percent, down from 4.40 percent.
Friday's commitments of traders report showed speculators were barely long in 10-year note futures and slightly short in 30-year futures, providing limited fuel to continue last week's rally.
"Chart patterns in mid- to long-dated Treasuries still point toward overall lower prices and higher yields," said John Kosar, president of Asbury Research.
