US Treasury debt prices crawled higher for a second session on Wednesday as consumer sentiment slipped, but the market was largely stagnant ahead of the Thanksgiving holiday. The University of Michigan said consumers felt less upbeat in November, potentially boding ill for the holiday shopping season that is key to US economic activity.
"Some people were looking for a little bit of a bounce in the index because the gasoline prices were favourable during that period of time but we didn't really get it," said Rick Klingman, head trader on ABN Amro's Treasury Desk.
That bolstered bonds somewhat, particularly considering a small retreat in inflation expectations suggested the Fed may soon have room to cut interest rates.
Still, the figures were too inconclusive and trading too thin to produce and major moves. Benchmark 10-year notes were up 2/32 and yielding 4.57 percent, down just one basis point on the day. Jobless claims data were also largely favourable to government debt.
A rise in the number of Americans filing for unemployment benefits could signal deterioration in the labour market, which generally drives interest rates lower. The 30-year bond rose 4/32 and was offering a yield of 4.65 percent, while five-year notes added 2/32 to yield 4.56 percent. Two-year debt inched up 1/32 for a yield of 4.75 percent.
Next week will see the return of major economic reports, with Thursday's release of the core personal expenditures index or core PCE - the Fed's favoured inflation measure - among the highlights. Recent data have pointed to a slowing economy but also inflation that remains too high for the Fed to comfortably begin slashing rates.
Any further sign that inflation pressures are abating could prompt renewed speculation about an early 2007 monetary easing from the central bank. The bond market will be closed on Thursday and close early on Friday.