DJ Treasurys Crash On Strong Data, Surging Stocks
11/27/2002
Dow Jones News Services
(Copyright © 2002 Dow Jones & Company, Inc.)
By Steven Vames
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--U.S. Treasurys got slammed hard Wednesday, under considerable pressure from a barrage of positive economic data, a $27 billion auction of two-year notes, and a surge in stock markets.
The selling left the yield on the 10-year Treasury note flirting with its highest yield since late August, a time when economic optimism was considerably higher than it was just a few weeks ago.
But signs of optimism over the economy and the stock market are starting to grip investors, making Treasurys the big fat loser in the bunch.
At 1:45 p.m. EST, the benchmark 10-year note was down 1 17/32 at 97 31/32 to yield 4.25%. The 30-year bond was down 2 23/32 at 103 30/32 to yield 5.11%.
The five-year note was down 30/32 at 98 18/32 to yield 3.32%, while the two-year note was down 8/32 at 100 4/32 to yield 2.07%.
The market suffered from a host of solid news on the labor market, manufacturing, and consumer fronts. Mid-dated issues in the five-year and 10-year areas got hit the worst, as some sellers were forced in by the big move. Managers of mortgage-backed securities portfolios were said to be shedding Treasurys, as were some speculators making stocks-for-bonds trades.
Beyond the data, the market was also pressured by a wave of supply that came from Treasury's $27 billion auction of new two-year notes. The issue was awarded at 2.12%, a full 13 basis points over where it traded in when-issued trading at the end of Tuesday's session.
But the data were the major theme of the day. Indeed, there was so many pieces of data to contend with it was hard for traders to pick out what was hurting the market most. But chief among the culprits were the data pertaining to factories.
The Purchasing Management Association of Chicago said its index of area business activity rose to 54.3 in November on a seasonally adjusted basis from 45.9 in October, according to a press release. In October, the index fell to 45.9 from 48.1 in September. A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates a contraction.
The Commerce Department reported orders for durable goods, or items meant to last three years or longer, rose by a stronger-than-expected 2.8% to $173.93 billion last month. It was the first gain since July. September orders were revised as a 4.6% decrease after previously being estimated as a 4.9% drop.
"The thing that really did the most damage was the Chicago release" given its connection to the Institute for Supply Management National Manufacturing Index, said John Canavan, market strategist with Stone & McCarthy Research Associates in Princeton, N.J. "There is a concern about whether or not things are beginning to turn" and the economy is truly beginning to improve, he said.
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