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Treasurys edge higher
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March 22, 2000: 3:18 p.m. ET
Investors optimistic on future monetary policy; credit spreads widen
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - Treasury securities ended slightly higher Wednesday on expectations the Federal Reserve will keep inflation in check and not hike interest rates aggressively.
"What we are seeing is a continuation of the relief that the Fed will fight inflation, but will do so gradually," said Charles Reinhard, chief market strategist at ABN Amro.
Shortly before 3 p.m. ET, the 30-year bond rose 1/32 to 103-27/32. Its yield, which moves inversely to its price, was unchanged from 5.97 percent Tuesday. Ten-year Treasury notes gained 3/32 to 102-23/32, their yield falling to 6.12 percent from 6.14 percent Tuesday.
Treasurys were confined to narrow trading ranges amid quiet activity through most of the session on the back of Tuesday's rate hike. The Fed increased the federal funds rate, the rate banks charge each other for borrowing money, by a quarter point to 6 percent, as expected.
The central bank has increased rates five times in nine months in an attempt to slow the economy and control inflation. But consumer spending and confidence remain strong and the Fed has signaled it will continue to hike rates until it sees a slowdown.
Many analysts expect the Fed to tighten again by a quarter point when it meets May 16.
Aside from the Fed, the spread between yields of agency debt issues, such as those issued by Freddie Mac and Fannie Mae, and Treasurys widened. The widening came after U.S. Treasury Under Secretary Gary Gensler suggested plans to reduce the perception that agency debt is fully backed by the U.S. government. Traders reported large selling of agency securities after Gensler's remarks.
Analysts said the launch of a $5 billion 10-year Freddie Mac issuance also contributed to credit spreads widening. The issue is expected to price Thursday.
With a lack of economic news Wednesday, market participants focused on equities, noting strength among U.S. technology issues limited gains for Treasurys as investors chase more profit generating trades. The tech-heavy Nasdaq composite index rose over 3 percent in late trade.
The Treasury announced it will auction $12 billion in two-year notes Wednesday, in line with expectations.
A speech by Fed Chairman Alan Greenspan did little to stir price movement. He made no references to monetary policy while speaking to a conference in Washington early in the session.
Dollar strengthens
The dollar rose slightly against the yen but was virtually flat against the euro Wednesday. Shortly before 3 p.m. ET, the dollar changed hands at 106.90 yen, up from 106.78 yen Tuesday, a 0.1 percent gain in the dollar's value.
Meanwhile, the euro traded at 96.02 cents, down from 96.05 cents Tuesday. 
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