Not even a plunge in oil prices or stocks could get bond jockies motivated Monday ahead of Tuesday's FOMC and five-year note auction. Moreover, the absence of Tokyo and London stock markets, which were closed Monday, paved flat any lingering trading enthusiasm.
Impending supply kept the belly of the curve under wraps and only the bond future poked its venerable head above water, but by the close every contract finished in the red. The damp price action came amid expectedly low pre-FOMC volumes, with the bulk of unremarkable deals said to be below 1,000 apiece on Treasury futures. Little of size was reported over in the Euro$ pits either.
The main sparse option activity was covered by a 500 lot straddle sold on September 10-year notes and then bought by another shop in the same size. Despite $83 billion in bills and notes being issued this week, dealers expect the refunding to go well. Stocks meandered in and out of the green in the morning, but tripped up and fell 1.3-1.7% in the last hour. The June bond closed down 3/32 at 102-20, while the two-year note and 30-year bond yield gap edged up a hair to +238 basis points.
The dollar culled some its post-payrolls losses, then finished meekly.