DJ Treasurys Stay Afloat Despite Brief Dips On Firm Data
By Shayna Stoyko Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Another stronger-than-expected economic report briefly knocked Treasury prices into negative territory midmorning Wednesday, but month-end buying needs proved strong enough to keep the bond market afloat. Government bond prices were little changed across the curve in recent trade. The latest selling catalyst came from the Purchasing Management Association of Chicago, which reported that its index of area business activity moderated to 61.7 in November from 62.9 in October. Economists were expecting a slightly bigger pullback to 60.0 this month. The Chicago data often serve as a proxy for the national manufacturing report from the Institute of Supply Management, which is due Thursday. The 10-year note''s yield tested the key 4.50% level after the data were released, but buyers emerged to take it back to 4.48% in midmorning trade, even with where it closed Tuesday. The Chicago report was the second firm piece of economic data to be released this session, coming on the back of a strong upward revision to third-quarter gross domestic product growth. The Commerce Department reported that the U.S. economy grew at a 4.3% annual pace in the third quarter, up from the 3.8% initial estimate of third-quarter growth reported last month. The government will release a final assessment of that quarter''s growth in December. Economists surveyed by Dow Jones Newswires had expected a more modest upward revision in the growth figures to 4.1%. But despite the robust growth, inflation components within the report were revised slightly lower, helping to ease the report''s sting to the bond market, which typically weakens when the economy shows strength. "This second look at third quartergrowth shows `all the right moves'' and sets the stage for a solid fourth-quarter reading," said Drew Matus, senior economist at Lehman Brothers in New York, in a research note. Economists at Bear Stearns in New York agreed, noting that "real GDP growth of around 4%" is likely in the fourth quarter. "We had a decent sell-off (Tuesday) so the market was already at a cheap level," said Rick Klingman, head of Treasury trading at ABN Amro in New York. Throw in the softer inflation readings in the GDP data as well as month-end buying needs by money managers who have to match their portfolios to extensions in benchmark indexes - and that''s why "we''re not getting the negative response we would normally get" on strong data, he said. Around 10:15 a.m. EST (1515 GMT), the 10-year Treasury was up 2/32 at 100 6/32 to yield 4.47%. The 30-year Treasury was 1/32 higher at 110 4/32, yielding 4.69. The five-year note rose 1/32 to 100 14/32 to yield 4.40%, while the three-year Treasury was flat in price at 99 31/32, yielding 4.39%. The two-year note was also unchanged in price at 99 23/32, for a yield of 4.39%.