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Strategies & Market Trends : The Amateur Traders Corner -- Ignore unavailable to you. Want to Upgrade?

To: Brasco One who wrote (16929)	12/5/2001 3:01:36 PM
From: RockyBalboa	Respond to of 19633

Zero cut Treasurys Nosedive After Data Triggers Economic Optimism NEW YORK U.S Treasurys sustained a behemoth sell-off Wednesday, sending yields massively higher as optimism about prospects for the U.S. economic swept through financial markets. At 1:45 p.m. EST, the benchmark 10-year note was down 1 24/32 at 100 28/32 to yield 4.89%. The 30-year bond was down 2 8/32 at 100 9/32 to yield 5.36%. The five-year note was down 1 2/32 at 96 27/32 to yield 4.21%, while the two-year note was down 15/32 at 99 30/32 to yield 3.05%. The market's fall was triggered mostly by a sharp rise in U.S. stocks and fresh signs of strength in economic data, and continued as selling forced others to sell. In particular, the National Association of Purchasing Management reported Wednesday that business activity for the nation's service sector returned to growth mode in November. The Dow Jones Industrial Average was recently up 168 at 10063, while the Nasdaq Composite Index was up 70 at 2033. The sell-off marked a violent reversal of the rally that Treasurys had seen in the four sessions preceding Wednesday, and brought Treasury yields near the highs they had most recently hit after a recent two-week sell-off that had also been prompted by strong data - in that case a strong increase in October retail sales. Strategists say that the NAPM non-manufacturing report, combined with stronger stocks and an uptick in oil prices Wednesday, was helping fuel selling sentiment that has built up as more and more data have suggested that the economy has passed its low point for the current economic cycle. "This data just adds to the fact there are more and more signs the bond market thinks we're past the low on yields, and that the market will be more vulnerable to selling, especially when you have a nice runup in prices like we've seen in the past few days," said William Hornbarger, bond market strategist at A.G. Edwards in St. Louis. The intensity of the move also marked a return to the pervasive volatility in the bond market that has caused wild and fitful swings in yields as attitudes on the direction of the economy fluctuate in the face of mixed economic data. On top of that, some market-watchers say that a general illiquidity in the market and a cycle of panicked accumulation, then jettisoning of positions, has amplified the movements. "Sure, people think growth has bottomed and the Fed may tighten sooner, but not as much as the price action suggests," said Peter McTeague, government bond strategist at Greenwich Capital Markets. "People are skittish and would rather sell, with liquidity not deep." Though the selling was sharp and violent, some traders cautioned that the move didn't appear to be the beginning of a new trend for the market. Rather, they said, the move represents the continuation of a wide range trade that will characterize the Treasury market as the economy "This doesn't seem to be the beginning of a long crash-and-burn trade. But until we get a better handle on the economy, we're likely to see these volatile moves in the market. If the market senses the Fed will be done easing and not ready to start tightening, yields will move back and forth" said Donald Galante, executive vice president at Fuji Securities.