Treasuries Finish Mostly Higher

Treasuries shrugged off a stronger construction spending report, but shorter-dated issues fell on profit taking

The wings of the Treasury curve managed to shrug off a reasonably good batch of data Friday, but the belly of the curve was not that fortunate. Stocks lost traction following an earnings hit announced by Home Depot, which kept stocks off-balance and in the red much of the session. Treasury prices set their low water mark early in the session, but ironically came to life after November construction spending gained a higher than expected 0.3% from a sharp upwardly revised 1.0% gain in October. Auto sales results for December also motored in throughout the day, with year-end financing incentives revving up U.S. auto sales dramatically (+36% GM, +8% Ford). Housing agency Fannie Mae announced a $4 billion 5-year note sale as its first offering of 2003, which may have softened up the comparable area of the Treasury give, though the deal is expected to be well-received and agency spreads were tame and narrow. Some volume sales kicked in, with put spread selling on 10-year notes, after the elevated levels from Thursday.

The March bond closed up 4/32 at 110-10, while the two-year note and 30-year bond spread closed unaltered at +317 basis points. Fedspeak from Minehan and Broaddus was mostly optimistically cautious and did not move prices, though Bush roused the troops.