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To: Les H who wrote (4464)	12/31/2002 11:26:55 AM
From: pallmer	Read Replies (1) \| Respond to of 29614

-- Treasury Yields Edge Ever Lower -- NEW YORK (Reuters) - Treasury prices firmed for a fourth straight session on Monday as an erratic performance from equities and generally soft U.S. economic data provided a further excuse to favor safe haven debt. A late bounce by the Dow <.DJI> leached away some of the early gains and trading volumes were desultory at best ahead of the New Year's Day holiday. But shorter-dated yields still eked out another record trough, reflecting the high premium placed on liquidity in these troubled times. "Treasuries offer some peace of mind over the holidays, and that's a valued commodity these days," said a trader at a U.S. primary dealer citing Iraq, North Korea, terrorism, rising energy prices and a falling dollar as just a few of the market's concerns. "Beyond all that, the U.S. economy clearly slowed this quarter and it's hard to see where the impetus for new growth is going to come from next quarter, so inflation's not an issue and the Fed should keep rates low. Not a bad background for bonds," he added. The market seemed to agree and the two-year <US2YT=RR> yield struck an all-time low of 1.57 percent, before inching back to 1.59 percent in late trade from Friday's 1.62 percent. The five-year note <US5YT=RR> added 3/32 taking its yield to a 11-week low of 2.71 percent from 2.73 percent. Further out the curve, steady buying from a single customer was enough to boost the 10-year <US10YT=RR> 4/32, pushing yields to 3.79 percent from 3.81 percent. The illiquid 30-year bond <US30YT=RR> gained most from the thin conditions rising 14/32 for a yield of 4.76 percent from 4.79 percent. BRIGHT SPOTS AND BLACK HOLES Monday's economic data were too mixed to offer much trading direction but overall did not contradict the weaker tone seen in other indicators recently. The National Association of Realtors reported that sales of existing homes fell a larger-than-expected 3.5 percent in November. Still, the annual sales rate of 5.56 million is high by historical standards and analysts assume current low mortgage rates will ensure housing remains one of the economy's few bright spots. In contrast manufacturing has been one of the economy's black holes and the latest survey of Purchasing Managers in Chicago suggested that was unlikely to change any time soon. The Chicago NAPM index fell to 51.3 in December from 54.3 in November, short of the 53.0 reading analysts had expected. Production and new orders both declined, though the employment index surprised by jumping 7.0 points to 50.3, its first push above the 50.0 growth-contraction divider since March 2000. Analysts were inclined to play down the importance of the figures, noting the Chicago survey tends to say more about the fortunes of the motor industry than the economy in general. They also caution that the regional surveys are not a reliable guide on what to expect from the more influential Institute of Supply Management's nationwide survey. The December report is due on Thursday and, on average, analysts look for only a modest improvement in the overall manufacturing index to 50.3 from a disappointingly sluggish 49.2 in November. Tuesday sees the release of December U.S. consumer confidence data but trading is likely to be even thinner given the market shuts early for New Year. (C) Reuters 2002. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. Symbols: US&DJI US;COMP 30-Dec-2002 21:35:09 GMT Source RTRS - Reuters News