Treasuries closed well above their lows Monday, but not in positive territory after being pounded by fresh corporate supply, a supersized $600 billion stimulus plan tomorrow, heaviness in the belly of the curve and new year allocation into stocks. The prospect of higher deficit spending and increased Treasury supply to fund such spending weighed on the bond market.
Data was mixed, with the Challenger job cut report confirming a 41% drop in announced cuts to 92,900, while the Services ISM report eased to 54.7 from 57.4. Though the data was mixed, stocks gained 2-2.5% thanks to confidence in their self-fulfilling "January effect," plus a little inspiration from the Bush plan apparently doubling from $300 billion.
Topping the list of corporate issuance that weighed on the belly initially were Goldman Sachs ($1.5 billion 5-yr), Bank One ($750 billion 5-yr), ADB ($1 billion 3-yr), though there may have been a little relief after Goldman Sachs priced.
The March bond closed down 8/32 at 110-01, actually quite a feat from 109-14 session lows, given stocks' relentless rise. Despite its sag in the middle, the wings of the curve closed unchanged, with the 2s-30s spread finishing at +317 basis points.
Fedspeak remained pretty balanced, with Atlanta Fed's Guynn only taking issue with Broaddus" ISM optimism. The dollar recovered from overnight weakness with stocks and oil tumbled a $1.