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Treasuries Finish in the Red

It was another lackluster trading session. Treasuries hugged the highs early on, but fell by the close. Prices opened higher following another round of Bank of Japan foreign-exchange intervention, which was prompted by a 7% rise in Japanese fourth-quarter GDP and a subsequent yen rally.

The foreign-exchange linked bid persisted into New York as vestige shorts from the overnight trade covered. Weaker housing data also helped. Retail participation was light and limited to curve trades, with extension trades being the dominant trade. But by noon, the rally stalled as the dollar popped without intervention help, and quelled speculation for more foreign-exchange related Treasury buying.

Prices moved into negative territory later on as the failure of 10-year notes to fall below 4% again triggered technical selling. The pricing of the upsized $1.25 billion Lehman deal also added pressure as retail made room by selling Treasuries.

It has been another lackluster trading session, but Treasuries have hugged the highs for much of the session. Prices opened higher following another round of BOJ FX intervention on the heels of a Yen surge, which was prompted by a 7% rise in Japanese Q4 GDP. The FX-linked bid, however, persisted into the NY session as vestige shorts from the overnight Asian Treasury buying.

Thus, prices were already firm before the Housing Starts data. Retail participation was light, and limited to curve trades -- more steepeners entered, but extension trades outweighed. The bid also held on specualtion that several new issue corproate deals would bring in rate lock buying on the pricing - all scheduled for today's business. By noon, prices lost some ground, as European day traders booked profits ahead of their close.

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