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To: pallmer who wrote (4465)	12/31/2002 11:28:32 AM
From: pallmer	Read Replies (1) \| Respond to of 29614

-- US Treasuries climb after consumer confidence drop -- (Updates comment, prices after confidence report) By Ellen Freilich NEW YORK, Dec 31 (Reuters) - A surprise drop in U.S. consumer confidence -- a weak signal for the economy -- gave fresh impetus to the U.S. Treasury market, sending prices up for the fifth session in a row. Short-term yields, which move in the opposite direction of prices, scored record lows on news that the Conference Board's consumer confidence index fell to a worse-than-expected reading of 80.3 in December -- far below economists' forecasts for an improvement to 85.5 -- from a revised 84.9 in November. The index has declined for six of the past seven months, and the decline in December took the index back to near the nine-year low touched in October of 79.6. "Bonds liked this report," said Carey Leahey, senior U.S. economist at Deutsche Bank. "It's a weak number ... (that) will really grab the attention of the (Federal Reserve) which sees consumer confidence as the link between Wall Street and Main Street. This number raises the possibility that the Fed may have to pull the trigger again (and cut interest rates)." Lynn Franco, director of the Conference Board's Consumer Research Center, said the major factor dampening consumers' spirits was the rising unemployment rate and the discouraging job outlook. "Weak retail sales over the holidays clearly reflect the current mood of consumers. Until there is an improvement in labor market conditions, there is not likely to be a significant upturn in confidence," Franco said. The dollar slipped and U.S. Treasuries firmed slightly after the weaker-than-expected report. Leahey said trading was thin ahead of New Year's Day, when markets will be shut. Trading will end early at 2 p.m. (1900 GMT) on New Year's Eve. Consumer confidence is closely watched by economists and businesses for clues about spending, which makes up two-thirds of the economy's punch. Holiday sales were lackluster in the lead-up to Christmas as consumers reined in spending, with the unemployment rate jumping to an eight-year high of 6 percent in November and talk of war dominating the news. Figures on Tuesday suggested that last-minute shopping failed to make up for a soft retail season, according to Instinet Research, which said sales at major U.S. chain stores rose just 0.7 percent in the four weeks ended Dec. 28 compared with the same period last month. Weak economic data and heightened geopolitical risk have proved potent fuel for the bond market over the last month. "There's still the flight to safety demand," said Keith Parker, Treasury market analyst at MMS International. "And soft economic data has definitely been supportive." On Monday, the National Association of Purchasing Management-Chicago reported that its manufacturing index fell to 51.3 in December from 54.3 in November. But the more comprehensive nationwide survey from the influential Institute of Supply Management is due on Thursday. On average, analysts look for only a modest improvement in the overall ISM manufacturing index to 50.3 in December from a disappointingly sluggish 49.2 in November. A reading above 50 indicates expanding manufacturing and below 50 contraction. Bonds were also benefitting from some year-end buying, Parker said. At 10:45 a.m. (1545 GMT), the two-year <US2YT=RR> yield was at an all-time low at 1.56 percent, versus 1.59 percent at Monday's close. The five-year note <US5YT=RR> added 6/32 to 101-16/32, taking its yield to a 11-week low of 2.67 percent from 2.71 percent at Monday's close. Further out on the curve, 10-year notes <US10YT=RR> were up 8/32 to 101-30/32, yielding 3.76 percent. The illiquid 30-year bond <US30YT=RR> gained most from the thin conditions, rising 21/32 to 110-7/32 for a yield of 4.72 percent, versus 4.76 percent at Monday's close. ((Reporting by Ellen Freilich, editing by James Dalgleish; Reuters Messaging: ellen.freilich.reuters.com@reuters.net; 646-223-6309)) ((Xtra clients: Click on topnews.session.rservices.com to see Top News pages in multimedia Web format. If you cannot access the pages, ask your IT department to check your Internet firewall settings. For a technical advisory, click on <C9991>.)) --------------MARKET SNAPSHOT AT 1552 GMT ------------ Dec T-Bond <USc1> 113-24/32 +20/32 Dec 10-year note <TYc1> 115-16/32 + 7.5/32 Change vs Current New York yield Three-month bills<US3MT=RR> 1.20 (unch) 1.219 Six-month bills <US6MT=RR> 1.21 (-0.02) 1.233 Two-year note <US2YT=RR> 100-12/32 (+02/32) 1.563 Five-year note <US5YT=RR> 101-16/32 (+06/32) 2.671 10-year note <US10YT=RR> 101-30/32 (+08/32) 3.763 30-year bond <US30YT=RR> 110-08/32 (+22/32) 4.713 (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. nN31391019 US/ US/N 31-Dec-2002 16:11:15 GMT Source RTRS - Reuters News