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Treasurys rally
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May 25, 2000: 3:38 p.m. ET
Unwinding of bets that Treasurys would fall lifts prices; euro climbs vs. dollar
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - Treasury securities ended sharply higher Thursday as investors who incorrectly bet that bonds would fall bought government securities to reverse their money-losing trades.
In the currency markets, the euro rose against the dollar and other major currencies despite the European Central Bank's decision to leave its key interest rate unchanged.
In contrast to recent sessions in which Treasurys traded inversely to equities, the unwinding of bets that Treasurys would fall, also known as short covering, lifted Treasury prices. 
Also helping Treasurys was a rally among European government bonds, as the euro advanced, increasing demand for securities dominated in that currency. One trader said there was talk of a large buyer of German bunds in the futures market.
Shortly after 3 p.m. ET, the 30-year Treasury bond rose 1-11/32 points to 102-2/32. The yield, which moves in the opposite direction to price, fell to 6.09 percent from 6.19 percent Wednesday.
The 10-year note, which many now consider the market benchmark, gained 23/32 to 100-28/32, with its yield retreating to 6.38 percent from 6.47 percent.
But the outlook for interest rates remained a key focus as investors await an afternoon speech by Federal Reserve Chairman Alan Greenspan. The Fed chief is expected to address via satellite a banking group in San Francisco.
Fears of higher interest rates continue to undermine the Treasury market. 
Since last June, the central bank hiked short-term interest rates six times in an effort to slow the economy and tame inflation. Many analysts expect the Fed to boost rates again in the near term. The next Fed monetary policy meeting is June 27-28.
A slew of upcoming economic releases may provide clues about the outlook for interest rates, particularly the May employment report, which is slated for release June 2.
Scott Graham, head government trader at Prudential Securities, told CNN's Before Hours he thinks the Fed's tightening cycle may be close to its end. (336K WAV) (336K AIFF)
Investors shrugged off the latest economic news. The Commerce Department said the second estimate for first-quarter Gross Domestic Product (GDP) was unrevised at 5.4 percent. The GDP figure, the broadest measure of goods and services produced, was slightly above consensus estimates of 5.2 percent.
In other economic news, U.S. jobless claims rose 6,000 to 284,000 in the week ended May 20, and existing home sales fell to a 4.88 million annual rate in April from a revised 5.20 million rate in March.
Meanwhile, traders said the Treasury's latest debt buyback went smoothly. The government bought $2 billion of securities maturing between February 2019 and August 2023 in the sixth leg of its buyback program.
The government received over $8 billion in offers. The average yield came in at 6.574 percent and the average maturity was 20.7 years.
The Treasury said it would announce details of the next buyback on June 21. Faced with a budget surplus, the department said it planned to repurchase up to $30 billion of longer-dated maturities this year.
Euro gains vs. dollar
The euro climbed against the dollar Thursday, rising to the equivalent of 91.27 cents, despite the European Central Bank's (ECB) decision to leave its key interest rate unchanged.
Europe's common currency also strengthened against the yen and British pound. Analysts said the euro benefited from a short-covering rally on relief that it did not get hit harder earlier in the day. Following the ECB news, it dropped below the 90-cent level.
 "There wasn't a lot of follow through to the downside," said Ben Strauss, vice president of foreign exchange at Bank Julius Baer. "People had to scramble to cover short positions."
Meanwhile, the dollar fell slightly against the yen amid continued uncertainty about Japan's economic recovery.
Shortly before 3 p.m. ET, the euro traded at 91.23 cents, up from 90.30 cents Wednesday, a 1 percent loss in the dollar's value. The dollar was at 107.41 yen, compared with 107.81 yen Wednesday. 
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