US Treasury bill rates up, bonds mostly jump

US Treasury bill rates jumped on Friday with the three-month rate posting its biggest rise so far in October, as signs of more credit supply pared the safe haven appeal of ultra-short debt. The other big mover was the 30-year bond, which dropped nearly a full point as traders reversed last week's big trade in reaction to the sales of $40 billion in older 10-year notes, analysts said.
Other Treasury maturities ended higher, as investors moved money into them in a late stock market sell-off. "The bond market is conflicted right now. There's the flight-to-quality and there's the pending supply so we are treading water here," said Frank Lesh, an analyst at FuturePath Trading in Chicago. The US Treasury Department sold another $60 billion in cash management bills T-bills on Friday, bringing the week's total bill sales to $254 billion.
The gyration in stocks, together with worries about supply and credit conditions, almost rendered the day's dismal data on housing starts and consumer sentiment afterthoughts. "We know the economic numbers will be pretty bad so we discounted them a bit," Lesh said. The rate on three-month T-bills, which economists peg as the "risk-free" rate on US assets, rose to 0.80 percent, up 31 basis points - the biggest one-day rise since late September. Other bill rates were flat to up 9 basis points.
The price on 30-year bonds was down 27/32 at 103-7/32. Their yield, which moves inversely to price, was 4.31 percent, up from 4.25 percent late on Thursday. Overnight interbank rates on dollars, euros and sterling fell close or below their respective central bank targets on Friday. Among other hopeful signs were narrowing spreads in the interest rate swaps; falling rates in the commercial paper market and improved appetite from investors for these once popular corporate IOU's, analysts said.
"I think they are making progress in restarting the money markets," said Mark Zandi, chief economist with Moody's Economy.com in West Chester, Pennsylvania. He said the credit market "is still far from normal," adding credit distress will likely continue into next year.
While extreme ends of the Treasury market suffered losses for a second straight day, other maturities eked out modest gains in late stock sell-off. The benchmark 10-year US Treasury note was up 13/32 in price to yield 3.92 percent, down 5 basis points from late Thursday. Two-year Treasury notes edged up 1/32 for a yield of 1.62 percent, down 2 basis points from Thursday.