Treasuries Mixed Early, Await Fedspeak
By Eric Burroughs
NEW YORK (Reuters) - U.S. Treasuries were mixed in early trade on Tuesday, with
long-term issues giving back their gains scored a day earlier when two Federal Reserve
officials reassured the market that inflation pressures remained muted.
``It's just a bit of profit taking,'' said Chris Malone, a trader at Zions First
National Bank.
But trading activity was light as the market waited to see what a bevy of
Fed officials have to say with no major economic reports for guidance,
traders said.
Long-term Treasuries have outperformed shorter-dated issues during the
past four sessions as market players have bet the Fed's 2.5 percentage
points in rate cuts this year will spark an economic rebound later in the
year and the Fed will soon conclude its rate-cutting campaign.
Worries about potential inflation pressures stemming from an economic
recovery had weighed on longer-dated issues for about two months, but
since the Fed cut rates a week ago, relatively tame consumer price data and comments from Fed officials calmed some of
those inflation fears.
The Fed has slashed the federal funds rate down to 4 percent so far this year in order to boost slumping economic growth. In
a Reuters poll taken after the Fed cut rates a week ago, most Wall Street economists said they expect the central bank to cut
rates on only two more occasions by a quarter-point each.
Fed officials have said the recent rise in long-term Treasury yields was a signal the market believes economic growth will pick
up speed in the second half of the year.
On Monday St. Louis Fed President William Poole said the rise in long-term yields meant ``the market is anticipating a revival
(in economic growth).'' Poole also said the recent rise in inflation expectations was not strong enough to be worrisome.
But trading volumes have been thin so far this week and some traders expected the market to stay dormant until Fed
Chairman Alan Greenspan gives a speech late on Thursday and a revised reading on first quarter economic growth is released
on Friday.
At 8 a.m. (1200 GMT), two-year Treasury notes (US2YT-RR) were flat at 99-11/32, yielding 4.35 percent. Five-year notes
(US5YT-RR) were flat at 98-14/32, yielding 4.98 percent.
Benchmark 10-year notes (US10YT-RR) fell 3/32 to 96-31/32, yielding 5.40 percent, while 30-year bonds (US30YT-RR)
fell 11/32 to 94-14/32, yielding 5.77 percent.
With only weekly retail sales reports on the economic data front for Tuesday, analysts said their attention would again turn to
a plethora of Fed speakers for more clues on the central bank's current thinking.
New York Fed President William McDonough speaks at a Japan Society banking roundtable on ``The Role of Bank
Capital'' in New York at 8:30 a.m. (1230 GMT).
Philadelphia Fed President Anthony Santomero speaks on the economic outlook before the Central Bucks Chamber of
Commerce in Willow Grove, Pennsylvania, at 8:35 a.m.
Minneapolis Fed President Gary Stern speaks on ``Good, Bad or Indifferent: The Future of the Regional Economy,'' before
the Winona State University's ``Labor Issues in the New Economy: A Regional Impact'' economic summit in Winona,
Minnesota, at 10:15 a.m. (1415 GMT).
Federal Reserve Board Gov. Laurence Meyer testifies in Washington on the stock market and its effect on the economy
before the Senate Banking subcommittee on economic policy at 10:00 a.m. (1400 GMT).
And Fed Gov. Edward Kelley speaks on ``What Are Those People Thinking? Or: Fed Policy Formulation'' before the
Rotary Club of Portland in Portland, Oregon, at 3:45 p.m. (1945 GMT). |
