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Debt futures

finish mixed

CHICAGO: U.S interest rate futures ended pit trading mixed after hitting session highs near the close.

Traders said buyers emerged during the final half-hour on talk of weak weekly Johnson-Redbook retail sales figures.

Futures advanced further in brisk trade when the retail sales report showed weekly chain store sales fell one percent versus the same period in July. The Johnson-Redbook figures followed a 0.2 percent decline in chain store sales reported during the morning in the Mitsubishi Bank-Wertheim Schroder report that suggested retail demand may be slackening, said Kathy Jones, analyst with Prudential Securities.

The long end continued to outperform the short end on the advance, which tugged September T-bonds through minor resistance at 109-16/32. They hit buystops above 109-18/32 as shorts covered positions, traders said.

One dealer was seen buying between 5,000 and 10,000 September T-bonds from 109-16/32 to 109-25/32 during the spurt of buying that included futures buying by options spreaders, traders said. Early in the day, prices fell in part on perceptions the Federal Reserve might not see need for another credit easing. Such speculation arose after an interview with Fed vice chairman Alan Blinder was published overnight.

"Blinder seemed to eliminate any chance for more easing," Jones said of the comments in the news wire article.

The dollar's strong, intervention-fueled rally added some support to the long end.

"I think it may be finally sinking in that this move (up) for the dollar should be good for bonds," Jones said.

A Eurodollar floor broker also said expectations that central banks currently buying U.S. dollars eventually might use those some of those dollars to buy U.S. Treasuries.

But some pundits still look for T-bonds to turn lower again soon.

"I think the key is the people who were short from Friday aren't short anymore, so the market should have room to move down now," said a T-bond futures floor broker.

At the end of pit trading, September T-bonds were up 16/32 at 109-28/32, 10-year T-notes gained 3/32 to 107-30/32, muni-bonds added 13/32 to 110-24/32, December Eurodollars fell three basis points to 94.11, and T-bills were down four basis points at 94.59.-Reuter