- NEW YORK (Reuters)
- Short-dated U.S. Treasuries rose on Friday on news that Sen. Paul Wellstone,
a liberal Democrat from Minnesota running for re-election next month, was
killed in a plane crash.
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- Analysts said his death raised the odds that the Republicans
could take control of the Senate, which would strengthen President Bush's
militant stance against Iraq.
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- Shortly after news of Wellstone's death, two-year Treasury
notesUS2YT=RR were up 4/32 at 100-8/32 and their yield fell to 1.99 percent
from 2.04 percent at midday and 2.06 percent on Thursday. The five-year
note US5YT=RR added 6/32 to 100-28/32 and its yield fell to 3.05 percent
from 3.10 percent on Thursday.
-
- "Whenever something like this happens, there's always
that safe- haven bid into the front of the market," said James Caron,
Treasuries strategist at Merrill Lynch Government Securities. "One
would think it probably strengthens the Republicans a little bit at the
moment," he said.
-
- Earlier, reports showing an unexpected fall in capital
spending last month and a plunge in consumer sentiment to the lowest level
in nine years in October boosted Treasuries.
-
- But the gains were relatively muted as volume wound down
ahead of the weekend and traders looked forward to more economic data next
week -- and beyond that, the Nov. 5 mid-term congressional elections and
the Federal Reserve's policy-setting meeting the following day.
-
- The Commerce Department said orders for durable goods,
factory and transportation equipment and other items lasting more than
three years, tumbled 5.9 percent last month after slipping just 0.6 percent
in August. The number was far worse than analyst expectations of a 1.8
percent decline and was the largest drop since November last year.
-
- "With the durable goods numbers, you have not eliminated
the market's thought process that the Fed is going to cut rates at some
point," said Kevin Flanagan, fixed-income strategist at Morgan Stanley.
-
- But other analysts said upcoming readings on consumer
spending, which accounts for two-thirds of U.S. economic activity, would
be more critical for the central bank.
-
- "The Fed won't like this report. But if they are
going to ease it will take evidence of the end of consumption growth, not
capital spending," said Christopher Low, chief U.S. economist at FTN
Financial.
-
- The University of Michigan's consumer sentiment survey
portended more bad news on that front. Its final October index skidded
to 80.6 from 86.1, with respondents citing the weak labor market and the
stock market's summer swoon.
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- MARKET AWAITING MORE DATA
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- In mid-afternoon trading, the benchmark 10-year noteUS10YT=RR
added 3/32 to 102-5/32 while its yield fell to 4.11 percent from 4.12 percent
in the previous session.
-
- Next Wednesday, the Treasury is to announce how much
it will sell in five- and 10-year maturities for its fourth-quarter refunding.
With the U.S. budget deficit swelling, a substantial increase in issuance
could boost yields as investors sell their holdings to make room for increased
supply.
-
- Yields on benchmark 10-year notes have fallen more than
0.15 percentage points, or 15 basis points, since Tuesday after hitting
two-month highs earlier in the week. But at the 4.10 percent yield level,
they are well above the 44-year low of 3.57 percent hit earlier in the
month.
-
- "I'm not surprised the level the market is at,"
said Ray Remy, head bond trader at HSBC Securities (USA) Inc. "I think
the market needs some new news to do any better from here, and I would
imagine that for the rest of the day, we'll hang around near here."
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- The next batch of forward-looking economic reports are
due Nov. 1, with data on U.S. manufacturing and payrolls for October.
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- Other figures on Friday showed new home sales hitting
a record 1.021 million annual rate in September on the lowest mortgage
rates in decades. Existing home sales rose 1.9 percent to a 5.4 million
annual rate.
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- But mortgage rates have climbed with Treasury yields
in the past two weeks, and that could cool the red-hot housing market.
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- Comments this week by Fed officials suggest the central
bank is in no hurry to cut the benchmark Federal Funds rate from the four-decade
low of 1.75 percent it has held since last December.
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