CHICAGO, April 23 (Reuters) - U.S. debt futures dropped to moderate losses in early pit trading as the market braced for Japan's economic stimulus plan expected early on Friday.
June Treasury bond and September Eurodollar futures briefly shaved losses after weekly U.S. jobless claims rose 29,000 (correct amount of increase) to 317,000 versus forecasts for up 19,000 at 308,000.
"We caught a slight bid from the jobless claims, but the locals sold it down," said one Eurodollar floor broker, who added that floor activity up to then remained very subdued.
But June T-bonds failed to extend upward and drew renewed sales as volume picked up on downticks and tone deteriorated.
"I think the overall tone in the market is pretty bearish," said a T-bond futures floor broker as June T-bonds turned around and dipped to a new morning low instead of rising further, like the contract did Wednesday morning.
"You saw what looked like they might try to repeat yesterday," he added. "I was looking to sell it at 05 (120-05/32) but it never got back up there. I think the longs started throwing in the towel."
Brokers said the June T-bonds could continued eroding if longs keep souring on upside prospects. They mentioned the 6.0-percent cash yield level as a nearterm objective.
Brokers pegged 6.0 percent yield variously at 119-04/32 to 119-10/32, depending on the basis for June T-bonds.
They also said players stayed leery about the potential market impact of Japan's economic stimulus plan.
Some brokers said U.S.-backed assets could rise on flight-to-quality buying if Japan unveils another plan that the market finds insufficient.
Others said the threat of Bank of Japan intervention to shore up yen if it falls on the package details could undermine U.S. Treasuries on nagging fears that Japan eventually might unload some U.S. Treasury holdings to finance intervention.
"You've got (people on) both sides of the fence," added the Euro broker of the market's psychology about the potential effect of the package. "That's why the market's not moving."
T-bond brokers noted good dealer selling on the drop, and with some cited early buying by one firm of between 4,000 and 7,000 June 119 T-bond puts.
The stream of corporate debt issuance that had weighed on the long end this week continued but at a reduced pace, they added. Futures broke hard late on Wednesday, pressured partly by news GTE Corp. sold a $2.1-billion, four-tranche debt deal, up from the original $1.5-billion offering.
In the short end September Eurodollars were expected to find support at 94.200 and 94.140, with resistance seen at 94.310 and 94.380.
At 0854 CDT/1454 GMT, June T-bonds fell 12/32 to 119-24/32, 10-year notes lost 5/32 to 112-07/32, five-year notes slipped 2/32 to 108-27.5/32, muni-bonds fell 12/32 to 121-01/32, September Eurodollars lost 0.020 to 94.225, and June T-bills rose 0.010 to 95.060.
11:23 04-23-98
Transmitted: 04/23/98 11:23 |
