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Treasuries Finish Lower

There was no fire or brimstone in Fed Chairman Greenspan's semi-annual monetary policy report to Congress. But his optimistic assessment of the economy, sharp criticism of the "infectious greed" of CEOs, and support of harsh penalties for malfeasance helped provide some temporary support for equities. Meanwhile, the rebound in stocks and the lack of signals that a rate cut might be in the offing caused Treasuries to unwind some of their recent gains. The two-year note underperformed marginally, with the yield rising nearly 10 basis points toward 2.65%.

The bond lost a point, which drove its yield about eight basis points higher. Neither Greenspan's prepared testimony nor his Q&A provided any new insights into the economy or policy. He reiterated that economic activity is on the rise, albeit with risks to final demand. He adroitly sidestepped questions on the dollar, but he gave no sign of worry.

Equities were under severe pressure heading into his testimony and though they were able to rebound during Greenspan's appearance, they gave up the ghost into the close. Treasuries, disappointed by Greenspan's neutral policy stance, couldn't benefit much from ongoing equity woes, not even late in the day when Dow losses again topped 2%.

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