Treasuries got off to a rocky start as tech shares showed little sign of ceding any recent hard one territory amid an M&A fest on Wall Street. The Nasdaq composite index put another +1.4% under its belt following news of EMC Corp's $1.2 billion bid for Legato Systems. Activity was fairly muted, however, as stocks waited until late in the day to extend gains.
Data was pretty scarce, with weekly retail sales moderately higher, while consumer credit rose more than $7 billion, or 5%. Talk of hedge-related selling -- thanks to the surge in corporate issuance -- also dominated early on. The front-end of the curve underperformed for a change on profit-taking on steepeners, with the 2-year note and 30-year bond spread closing 4 basis points narrower at +334 basis points.
There were reports of bearish purchases of puts on August Fed fund futures as well, though this appeared to be more a position-driven rather than policy-motivated move. The 10-year note continued to be squeezed in a very tight repo market, trading near 0%, meanwhile the Treasury called for dealer position reports on the issue.
The September bond traded as much as a half point lower, but pared its loses by the close to -8/32 and 115-02. U.S. swap and agency spreads widened, while the dollar finished in the middle of its firmer range.