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Treasuries End Higher


Treasuries finished strongly Monday, paring some of Friday's worst losses on the low-volume equity surge back then. Friday's stock bounce proved to be of the "dead cat" variety and Treasuries responded in kind, with curve recovering its steeper bias. Revelations that Reliant Energy and Merck misdiagnosed $20 bln as earnings the past couple years put a quick end to the budding optimism on Wall Street.

The September bond closed up 11/32 at 103-00, but the cash bond gained after the close to +23/32. Safe-haven flow continued to underpin the front end of the Treasury curve as investors shunned Wall Street and scoff at Congressional hearings with Worldcom execs and cronies. The two-year note and 30-year bond curve widened out through +268 basis points after narrowing to +264 basis points on Friday's short-covering equity rally.

Despite the cautious tone evident in Treasuries today, there are few impediments to a test of the +272/275 basis points zone before a major double-top is at hand. The dollar finished heavily, shadowing stocks the entire session and crude oil fell about 75 cents to $26/barrel after the terror event risk bid was surrendered again. Bond-supportive energy declines took the CRB down over two points to 209.30.


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