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Treasurys keep steady
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August 25, 2000: 3:23 p.m. ET
Existing home sales drop boosts notion rate hikes to end; euro up vs. dollar
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - U.S. Treasury bonds ended little changed Friday, paring earlier losses after a surprise decline in U.S. existing home sales reinforced speculation that the Federal Reserve will refrain from raising interest rates for the rest of 2000.
The dollar edged lower against the euro but was virtually flat against the yen.
Shortly before 3 p.m. ET, the benchmark 10-year Treasury note was flat in price at 100-7/32. The yield was unchanged from its 5.72 percent level Thursday.
The 30-year bond dipped 4/32 to 108-9/32, its yield also unchanged at 5.66 percent.
The latest housing data helped the market recover from profit taking early in the day. Existing home sales plunged 9.8 percent to an annual rate of 4.79 million units in July, a five-month low, compared with an upwardly revised 4.3 percent gain in June, according to the National Association of Realtors.
The decline was larger than analysts' forecast by Briefing.com of a decline to an annual rate of 5.15 million sales. As a result, investors remained optimistic about the outlook for rates.
The October fed funds contracts, a gauge of where interest rates are headed, is  suggesting a mere 4 percent chance of a tightening at the next policy meeting on Oct. 3.
Although investors are betting the Fed will stay sidelined, many analysts were skeptical about a possible easing. David Jones, chief economist at Aubrey G. Lanston, told CNN's Ahead of the Curve that he does believe the Fed will ease rates. (329K WAV) (329K AIFF)
The central bank began its aggressive tightening campaign in June 1999, raising rates six times. On Tuesday, it left rates unchanged.
Remarks by Fed Chairman Alan Greenspan also provided support. Addressing the Kansas City Fed's Global Economic Integration forum in Jackson Hole, Wyo., Greenspan said he sees no credible evidence that the rate of productivity growth has slowed.
"Greenspan's comments underscore the notion that the Fed believes productivity is growing strong enough to allow the economy to grow at a faster pace without inflation," said Tony Crescenzi, chief market strategist at Miller Tabak & Co.
There was little reaction to a revision on second-quarter gross domestic product (GDP). The Commerce Department said GDP growth was 5.3 percent in the quarter from its initial reading of 5.2 percent.
GDP, the broadest measure of goods and services produced, was largely in line with economists' expectations.
Investors now anticipate two key economic reports slated for next week, August employment data and the National Association of Purchasing Management (NAPM) index, a measure of manufacturing activity. Both are scheduled for release Sept. 1.
(Click here for a look at Briefing.com's economic calendar.)
Euro posts slight gains
The euro advanced against the dollar Friday, reaching an intra-day high of 90.72 cents following the report of the drop in existing home sales.
However, traders remain bearish about Europe's common currency. Dan 
Bernzweig, foreign exchange trader at Bank Leumi in New York, expects the euro to retest its lows before it starts to run up again.
Analysts said opinions were mixed as to whether the European Central Bank will raise rates at its meeting next Thursday.
Shortly before 3 p.m. ET, the euro was at 90.32 cents, up from 90.16 cents Thursday, a 0.2 percent loss in the dollar's value. The dollar traded at 106.98 yen compared with 106.90 yen Thursday. 
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