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Bonds on winning streak
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March 23, 2000: 4:18 p.m. ET
Yields fall to lowest levels in 7 months amid selling of agency securities
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - Treasury bonds rallied Thursday, pushing yields to their lowest levels in seven months, as market participants reallocated money to government securities out of agency bonds such as Fannie Mae and Freddie Mac.
The "flight to quality" movement was fueled by speculation the government may take steps to reduce the perception that agency debt was fully backed by the faith and credit of the U.S. government.
"It was an aftershock to Gensler's testimony and underscored the rapid shrinkage of the supply of Treasury securities vs. all other debt," said Jim Glassman, senior U.S. economist at Chase Securities, referring to U.S. Treasury undersecretary Gary Gensler.
Bonds have shown considerable strength recently, with Thursday's advance marking nine consecutive sessions of gains.
Shortly before 3:30 p.m. ET, the 30-year bond rose 24/32 points to 104-22/32. Its yield, which moves inversely to its price, fell to at 5.91 percent -- its lowest level since late August -- from 5.97 percent Wednesday.
 Ten-year Treasury notes gained 10/32 to 103-2/32, their yield falling to 6.08 percent from 6.12 percent Wednesday.
Appearing before Congress Wednesday, Gensler said he supported the removal of the line of credit between the U.S. government and government-sponsored enterprises (GSEs), or agency securities.
As a result, credit spreads, the gap between their yields and the yields of agency securities, widened.
GSEs include the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Bank System. They are privately owned but federally chartered companies. Created by Congress to assist consumers in obtaining mortgages, holders of the debt instruments do assume some risk.
Looking ahead, Tony Crescenzi, senior market strategist at Miller Tabak & Co., told CNN's Before Hours that the government may distance itself from the GSEs in order to avoid the misconception that it fully backed these agency issues. (176.4K WAV) (176.4K AIFF)
Elsewhere in the agency market, a $5 billion 10-year Freddie Mac issuance priced Thursday.
Concerns about diminishing 30-year bond supply continued to provide support. The U.S. Treasury announced plans in late January to reduce the issuance of long-term debt by as much as $30 billion through a buyback program to counter the nation's budget surplus.
The program represents the first time in 70 years the government repurchased national debt. The Treasury bought $2 billion in the first two legs of the program this month, and the third leg is expected in the second half of April.
Two-year notes slip
But shorter-dated maturities, such as two-year notes, gave back earlier gains after the Federal Reserve released minutes of its February monetary policy meeting. Analysts considered the minutes hawkish, as the notes revealed that a few members preferred an increase of a half-percentage point, instead of the quarter-percentage point enacted at the February meeting.
Short-dated maturities remained pressured due to their sensitivity to changes in monetary policy. The Federal Reserve Tuesday raised short-term interest rates by a quarter point in an attempt to slow economic growth and keep inflation at bay.
The rate hike was the fifth since June, but consumer spending remains strong. There is widespread belief the central bank will tighten again when it meets on May 16.
Investors shrugged off the latest economic news. U.S. weekly jobless claims rose 4,000 to 266,000. Friday's calendar includes February U.S. durable goods, which measures orders for big-ticket items. Analysts polled by Briefing.com forecast new orders for durable goods to be unchanged from a 1.3 percent decline in January.
(Click here for a look at Briefing.com's economic calendar.)
Euro jumps vs. dollar
The euro rose sharply against the dollar Thursday. Traders attributed the jump to European Central Bank Vice President Christian Noyer, who ignited speculation about the possibility of government intervention.
Shortly before 3:30 p.m. ET, the euro traded at 97.16 cents, up from 96.10 cents Wednesday, a 1.1 percent gain in the euro's value.
Meanwhile, the dollar changed hands at 107.36 yen, up from 107.03 yen Wednesday, a 0.3 percent gain in the dollar's value. 
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