| Home Page
Treasuries Bounce, Wary of Moskow Factor
Reuters
Tuesday, February 3, 2004; 9:19 AM
NEW YORK (Reuters) - U.S. Treasury prices rallied on Tuesday, as a return of safe-haven concerns and talk of more intervention-related demand from Asian central banks forced short-covering in a generally bearish market.
The only major economic data due Tuesday are auto sales for January. They are likely to show a pullback from December's elevated levels, so posing little threat to bonds.
More dangerous may be a speech by Federal Reserve Bank of Chicago President Michael Moskow. He will be the first Fed speaker since the central bank unnerved the bond market last week by changing its commitment to keeping rates low.
"Moskow's the wild card," said one trader at a U.S. primary dealer, still nursing a grudge at the steep price falls triggered by the Fed last week.
"People are wondering if he'll note the market's violent reaction to their (the Fed's) change of phrase and try and play it down," explained the dealer. "Or whether he'll suggest the market was right to bring forward the timing on a hike because the economy's doing so well."
In the meantime, bonds were still benefiting from a safe-haven bid sparked by the discovery of the toxin ricin at a U.S. senate building. In late 2001, Congress was targeted with anthrax substances.
In addition, the Bank of Japan was thought to have intervened again to limit the yen's rise and traders assume a portion of any dollars bought would end up in Treasuries.
The BOJ is not alone in being a huge dollar buyer. The Bank of Korea on Tuesday reported its reserves grew $2.1 billion in January to hit a record $157 billion, and dealers assume much of that would be kept as Treasury paper.
All together it was enough to lift the benchmark 10-year Treasury note up 11/32, taking its yield down to 4.11 percent from 4.15 percent late Monday. Yields had reached as high as 4.20 percent last week after the Fed spooked the market by dropping its commitment to keeping policy accommodative for a considerable period.
Thirty-year bonds added 15/32, nudging its yield to 4.95 percent from 4.99 percent.
At the short end, two-year notes firmed 3/32, compressing yields to 1.77 percent from 1.81 percent. Five-year notes gained 6/32, leaving its yield at 3.11 percent from 3.15 percent.
Bond futures <0#TY:> were firmer while equity futures eased on the ricin news.
Economic data out on Tuesday include auto sales for January. Analysts look for sales of North American-made cars to slow to an annual 5.5 million from a revised 5.65 million in December, while light trucks are seen at 8.2 million from a revised 8.92 million.
Cold weather may have chilled sales last month, though such results would still be strong historically.
Later, Treasury Secretary John Snow testifies on the White House's 2005 Budget proposal before the House Ways and Means Committee around 2 p.m.
Continue with:
| 
