AP News, May 1st, 2007
U.S. government bond prices inched down Tuesday as a glowing April manufacturing survey reminded investors yet again that the economy is too strong to warrant a cut in interest rates.
At 5 p.m. EDT, the 10-year Treasury note was down $1.25 per $1,000 in face value, or 4/32 point, from its level at 5 p.m. Monday. Its yield, which moves in the opposite direction, rose to 4.64 percent from 4.62 percent.
The 30-year bond fell 1/32 point. Its yield rose to 4.82 percent from 4.81 percent.
The 2-year note fell 2/32 point. Its yield rose to 4.63 percent from 4.60 percent.
Yields on 3-month Treasury bills were 4.90 percent as the discount rate rose 0.05 percentage point to 4.77 percent.
The Institute for Supply Management's index of manufacturing activity rose last month to its highest level in exactly a year, reaching 54.7 from 50.9 in March, and easily outstripping the forecast increase to 51.0. The reading included surges in new orders, and, more ominously for inflation hawks, prices paid for manufactured goods.
The September Eurodollar futures contract is currently pricing in roughly a 68 percent chance for a rate cut in the third quarter, down from 88 percent just before the ISM release.
Fed funds futures contracts envisage no change in the benchmark rate at next week's Federal Reserve's Open Market Committee meeting or at the subsequent meeting in June.
Wednesday's session could bring more volatility for the government bonds market, with the Treasury's quarterly refunding announcement. The biggest news from this will most likely be the suspension of three-year note issuance, though Ward McCarthy, managing director of Stone & McCarthy, expects little market reaction.
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Laurence Norman and Danielle Reed contributed to this report.
