U.S. bonds were little changed early Monday amid expectations that reports in coming days will show economic growth is fizzling.
Official reports this week will describe the economy's growth rate and employment costs in the year's third quarter, as well as October manufacturing and labor conditions."Our forecast is for the market to be about 20 basis points better at week end," said Patrick Dimick, a Treasury market strategist at CS First Boston in New York. "It's certainly a gigantic week in view of the data."
The benchmark 30-year Treasury bond rose less than 1/8, or $1.25 per $1,000 in early trading, leaving its yield at 6.81 percent.
"If the data are very friendly," showing slower growth and a reduced risk of a surge in the inflation rate, bonds will rally about 5/8, driving yields to 6.6 percent, Dimick said. That could set the stage for yields to fall to the 6.55 percent First Boston is forecasting for year-end.
Others agree that this week could prove critical for investors in the $3.3 trillion market for U.S. debt. "This week probably represents a crossroads," said Tom Carpenter, chief economist at ASB Capital Management, a Washington-based company with $6 billion in bonds. "This is where the market could set itself up to rally over the next couple of months."
The week's indicators include the third quarter's employment cost index tomorrow, the third-quarter gross domestic product report Wednesday and Friday's re-port on the number of workers businesses added to payrolls in October. Also on Friday, the National Association of Purchasing Management releases its monthly survey of manufacturers.