DJ Debt Futures Review: Slight Lift From Oil, Stock, Dollar Moves
By Allen Sykora
BEND, Ore. (Dow Jones)--Interest-rate futures backed off from their early
highs Monday but still managed to post modest gains for the day.
Supportive influences overnight and early in the session were soggy
global equities, soaring energy prices and a U.S. dollar that fell so far
that there was conjecture about possible Bank of Japan intervention, analysts
said.
The futures pulled back some, however, as oil prices turned lower and
stocks bounced off of their lows, analysts said.
Dec 10-year notes settled up 5 ticks at 113-28.5, Dec Treasury bonds
added 5 ticks to 114-11, and Jun Eurodollars gained 1.5 basis points to 97.39.
Dec 10-year notes hit a life-of-contract high of 114-05 overnight and Dec
bonds hit a contract high of 114-25.
"Stocks had looked like they were going to fall out of bed pretty hard
this morning," said one Chicago-based broker. "People wanted to get out of
equities and put some money into Treasuries."
The Dow industrials earlier traded down by as many as 49.41 points.
Contacts also pointed to the contract high of $55.67 hit in Dec crude
oil overnight, as well as the highest natural-gas prices in 19 months. The
thinking is that soaring energy costs will derail some of the economic
momentum, in turn meaning Federal Reserve tightening may not be as aggressive
as might otherwise have been the case.
"People will be starting to get higher heating-oil and natural-gas
bills," said one contact. "It's not just gasoline prices."
Still another bond-friendly factor was the U.S. dollar falling below 107
yen for the first time since mid-April, pointed out Beth Malloy, bond-market
analyst in Chicago with Briefing.com. This resulted in big gains in gold,
which in turn tends to generate worries about inflation.
"But one of the big things with the dollar is we moved to levels where
we're starting to look for intervention," said Malloy.
More specifically, she pointed out, the Bank of Japan last intervened on
behalf of the dollar around 105 yen many months back. The currency pair fell
as far as 106.20 yen Monday.
When the BOJ does intervene to buy dollars, the assumption is the bank
will put those dollars to work in short-term government securities.
The debt market retraced some of its gains as oil backed off from its
early highs, however, said Malloy. Dec crude ended down 63 cents for the day
at $54.54. Furthermore, the Dow industrials managed to move into slightly
positive territory and were up by 5 to 10 points as the interest-rate pits
were closing.
Another contact blamed some of the pullback on the lone economic release
of the day, which showed that September existing-home sales rose 3.1% to an
annualized rate of 6.75 million, compared to forecasts for 6.52 million.
Some profit taking set into debt products after their early gains, said
Malloy. Much of the movement was based on the happenings in other markets.
"There wasn't a whole lot of self-driven activity going on today," she
said. "We're grasping at whatever we can glum onto to keep us moving."
The lone economic release for Tuesday is the Conference Board's consumer-
confidence index at 0900 CT (1400 GMT). The consensus forecast is for a fall
to 94.0 in October from 96.8 in September.
-By Allen Sykora; Dow Jones Newswires; 541-318-8765;
[email protected]
(END) Dow Jones Newswires
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