A renewal of Mideast tensions, higher oil prices and helter-skelter stock-market movements could continue to unsettle the government securities market. Adding to those factors is the approach of a US presidential election and a heavy slate of first-tier economic data.

"Economic releases will move more to the forefront, because they will cover almost every facet of the economy," said Mark Freeman, portfolio manager and vice president at Dallas-based Westwood Management Corp. Last week, selling drove Treasury yields slightly higher. The yield of the benchmark 10-year note stood late Friday at 5.707%, up 0.08 percentage point from a week earlier.

But at those yield levels - which weren't far from the lows of the year - the market remained fairly expensive, investors said. "A shortage of government bonds and uncertainty in the global environment are causing people to pay too much for Treasurys, compared with agency debt and corporate bonds," said Mark MacQueen, a portfolio manager and executive vice president of Sage Advisory Services in Austin, Texas. Barring new signs that the Federal Reserve is poised to reduce interest rates, yields won't have justification to drop much this week, strategists said. They saw the 10-year note yield staying between 5.65% and 5.80%.

But those predictions won't hold if there is a flare-up in the Middle East or a decline in stock prices big enough to fuel worries about US economic growth. Investors might flock to the relative safety of US government securities, bidding yields lower, analysts noted.

The Treasury market "is not screaming at you to buy it, but the fundamentals are still pretty good. It's a safe haven. Treasurys supply is shrinking and the economy is slowing," summed up Arthur Micheletti, chief investment strategist at Bailard, Biehl & Kaiser, Foster City, Calif.

Meantime, people in the market are debating the impact of the approaching election. Its results could be critical to the economy and to government programs affecting the bond market, such as Treasury Department repurchases of Treasurys outstanding. But it is risky to wager on the election because of the wide range of possible outcomes, some market participants noted.

"If Congress remains in the control of the Republicans, I think there's a real high expectation that a [Texas Gov. George W.] Bush win would produce significant tax cuts and ultimately a slowing of [growth in] the surplus," said Todd Petzel, president and chief investment officer at Commonfund Asset Management Co. in Wilton, Conn. But, he added, "if [Vice President Al] Gore wins and Congress remains in the hands of the Republicans, a lot of the spending plans he has in mind really won't go anywhere."

This week's slate of economic reports also will compete for the bond market's attention.

(The Wall Street Journal)