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| Old conundrum, new twist
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| Inverted or flat, the yield curve points to a weaker Federal Reserve, not a downturn. (Full story)
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NEW YORK (CNN/Money) -
Bonds drifted Thursday and the dollar edged lower against the euro and the yen after a government report showed that applications for jobless claims fell last week in line with forecasts.
Investors awaited a speech from Federal Reserve Chairman Alan Greenspan on Friday, although it is not clear that he will give indications about monetary policy.
The benchmark 10-year note was up 3/32 of a point at 100-23/32 to yield 4.16 percent. Just before the initial jobless claims report was released, the yield on the 10-year note treaded between 4.17 and 4.18 percent.
Thirty-year bond prices were up 12/32 of a point at 115-13/32 to yield 4.37 percent, down from 4.39 late Wednesday. Treasury prices and yields move in opposite directions.
In shorter-dated debt, the five-year note lost one tick to yield 4.04 percent, and the two-year was down 1/32 of a point to yield 4 percent.
The spread between the 10- and two-year notes shrank on Thursday to a meager 0.15 -- its narrowest range since early 2001.
Initial jobless claims for the week ending Aug. 20 fell to 315,000 from an upwardly revised 319,000 in the previous week, the Labor Department said. The reading came in well below the 342,000 recorded for the same period a year earlier and was in line with Wall Street forecasts.
The results did little to move a range-bound market as traders kept a wary eye on crude prices amid a week of little economic data.
Investors also awaited news from Fed Chief Alan Greenspan on Friday.
Given recent strides in the market, some dealers were predicting a sell-off if, barring some unlikely change of heart, Greenspan delivered his usually upbeat message on the economy.
But the topic of his speech, "Reflections on Central Banking," is rather ethereal, and most investors were not expecting his remarks -- which will not be followed by a question and answer session -- to bear directly on the market.
"Given this is a swan song for Greenspan, I think it's going to be one more of these global topics," said David Ader, Treasury market strategist at RBS Greenwich Capital. "There will be very little if anything that will give us any insight into monetary policy."
More important, he argued, would be minutes from the Fed's August meeting, due for release next Tuesday.
Until then, the market would flutter within a narrow range, even if that band has been creeping ever lower in recent weeks as investors bet that sky-high gasoline costs would eventually catch up with consumers.
The U.S. central bank has raised the fed funds rate at 10 consecutive meetings going back to June 2004, taking the rate to 3.5 percent, and fixed-income markets have priced in at least two more quarter-point rate hikes at the Fed's September and November committee meetings.
In currency trading, the euro bought $1.2308, up from $1.2272 late Wednesday. The dollar bought ¥110.00, down from ¥110.17 in the previous session.
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Click here for updated bond charts.
--from staff and wire reports
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