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Treasurys finish flat
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November 23, 1999: 3:53 p.m. ET
Bonds little changed amid negative tone, despite durables report; dollar is mixed
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NEW YORK (CNNfn) - Treasury bonds ended the week's last full trading session little changed Tuesday, failing to gain despite a government report showing an unexpected drop in orders for big-ticket items.
Typically, the sharp 1.3 percent drop in October orders placed with U.S. manufacturers would suggest the kind of economic slowdown and muted inflation that would bring buyers to bonds.
But analysts said a host of inflation-suggesting negatives overshadowed the often volatile report from the Commerce Department.
"The official report is unenlightening." said Ian Sheperdson, chief U.S. economist at High Frequency Economics. "The numbers do not change our view about the underlying strength in manufacturing."
The market appeared to agree. Just before 3:15 p.m. ET, the price of the benchmark 30-year Treasury bond fell 1/32 to 99-1/32. Its yield remained unchanged at 6.19 percent. Shorter dated maturities were flat to slight higher.
With an early close Wednesday and Friday and a full close Thursday for Thanksgiving, traders expect no major price movements until next week, when the Labor Department issues its last monthly employment report of the year.
Bonds have fallen nearly every day since last Tuesday, when the Federal Reserve raised its main lending rate by a quarter of a percentage point, its third rate hike of the year.
"A negative pallor hangs over the market," said Mike Boss, bond futures broker at IBJ Lanston Futures.
Among the negatives, crude oil for January delivery rose as much as 93 cents Monday to $27.07, sparking fears of a pick-up in inflation, which erodes a bond's value. The price of the widely used commodity fell slightly Tuesday.
Further, analysts say the surging stock market, because of its effect of making people feel wealthier, may lead to big increases in holiday spending. The Nasdaq composite index posted its 44th record close of the year Monday, but moved lower Tuesday.
Unemployment, meanwhile, dropped to a near 30-year low of 4.1 percent last month, sparking concern that business will have to spend more to retain employees.
All these gains may show up in the government's economic indicators, leading some analysts to predict the Federal Reserve will begin a series of rate hikes next year.
In a note to clients, Donaldson Lufkin & Jenrette said it expects the Fed to tighten credit in February and then again sometime next summer, "to preclude strong inflation."
Dollar mixed
The dollar was mixed against the major currencies Tuesday, rising against the euro but falling versus the yen.
Just before 3:15 p.m. ET, it cost $1.0274 to buy one euro from $1.0314, a 0.38 percent drop in the euro's value.
Many analysts have long predicted a rebound for the euro, which has lost value year-to-date and is trading near its lifetime lows.
But Marc Chandler, chief currency strategist at Mellon Bank, sees the regional currency edging lower through year's end
"People are looking for a trend and going with the (downward) trend that seems to be low risk," he said.
Just before 3:15 p.m., ET, the dollar slipped to 104.16 yen from 104.60 Monday, a 0.42 percent drop in the dollar's value.
But with a market holiday overnight in Japan leading to thin volume, analysts read little into the day's dollar/yen trade.
"It's more of a reflection of thin markets than new developments," Mellon Bank's Chandler said.
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