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Treasuries Rally after NAPM Disappointment

An inauspicious start to the new year for stocks on more evidence of the economy teetering on recession boosted the value of Treasuries, with front end yields toppling below 5% for the first time since the capital market seizure of Oct-98.

Right off the bat Dec NAPM's plunge to 43.7% from 47.7% set off the warning bells, marking the lowest level since recessionary times back on April 1991. On the first day of 2001 trade NASDAQ comp fell over 7%, taking out last year's low water mark of 2288 in a single session and erasing hard won gains in the latter half of Dec. This came thanks to the souring data, hard landing fears and earnings warnings in the internet hardware sector which infected the S&P and Dow as well.

The Mar bond pumped iron to fresh contract highs of 106-11, while the cash bond gained nearly 2-points to 113.09, helped by "Fed sources" stories of a post-payrolls intermeeting cut. Curve steepening remained the name of the game, however, given the jump in NAPM's prices paid and rumors of hedge fund selling into the rally at the long end. The trade-weighted dollar fell to 6-mth lows below 109.

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