Treasuries had a rough ride Tuesday. Fixed income investors sifting through Greenspan's semi-annual testimony to the Senate Banking Committee didn't like what they took away from the Q&A session afterwards.
The Fed chief responded that he saw a "low probability" of recession, with tax cuts standing as an "insurance policy" as well. The March bond had popped above 105-00 on the first reading of his text, which highlighted "downside risks predominating," but the rest of the tome was populated with caveats and hopes that recession could be avoided which suggested a shallower easing trajectory.
Profit-taking kicked in, with heavy handed dealer selling of 10,000 March bonds on the recession comment, followed by a breach of the 50-day moving average at 104-03 before support arrived. Greenspan later hinted that paying down the debt to "zero" was more important than extending the long bond's life as a debt management tool. He also alluded to a new compressed policy cycle thanks to tech advances.
January retail sales jumped back +0.7% from a weather-dampened +0.1% in December, but this was merely a small footnote to the session.