No Rise on Rates, Says FED!

10-year note yield hits 6-month low
Bond market rallies as weak factory numbers spark bets rates will soon head lower; dollar slips.
September 21 2006: 4:52 PM EDT

NEW YORK (CNNMoney.com) -- Treasury bond prices surged Thursday after a surprisingly weak reading on Mid-Atlantic business conditions reinforced views the Federal Reserve will not have to raise interest rates any further.
In fact, the weak business conditions index, when combined with other recent numbers showing a slowing economy, bolstered the view of some economists that the Fed could actually start cutting rates next year.

The dollar slipped against the euro and the yen.
The 10-year Treasury note gained 23/32, or $7.10 on a $1,000 note, to yield 4.64 percent, its lowest level since March, down from 4.73 late Wednesday.
The 30-year bond rose 1-3/32, or $10.90 on a $1,000 bond, to yield 4.77 percent, down from 4.84 percent the previous session. Bond prices and yields move in opposite directions.
The five-year note rose 15/32 to yield 4.59 percent, while the two-year note was up 6/32, yielding 4.76 percent.
The Federal Reserve Bank of Philadelphia said Thursday its index of business conditions fell in September to its weakest level since April 2003 - coming in well below economists' expectations.
As expected, the Fed's policy-makers voted to keep their overnight federal funds rate target at 5.25 percent on Thursday, the level it reached in June after 17 straight increases stretching over more than two years.
Bond investors were not surprised by the Fed's move, especially in the wake of two critical reports released Tuesday that revealed lower inflationary pressure at the wholesale level and flagging growth in the housing industry.
In currency trading, the euro bought $1.2787, up from $1.2687 late Wednesday. The dollar bought ¥116.30, down from ¥117.45 the previous session.
Reuters contributed to this report