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Treasuries Rise, but End off Highs

It was a pretty choppy session with prices more or less moving sideways. Treasuries held the opening bid, but the lack of follow-through buying stalled upticks early on. Mortgage-related sales underpinned pullbacks. By midmorning, prices jumped on misleading news of a truck explosion in Yemen. There was no terror connection, so prices fell back, this time led by retail sellers of bonds.

The data were mixed. A decrease in layoffs as suggested by Challenger, was offset by a drop in IBD/TIPP (a good indicator for Michigan consumer data). But a new terror threat -- an Al Qaeda audio tape -- renewed the bid.

The focus then shifted to the mediocre 5-year auction results. The cover was only 2.28 (sub-average), but indirect bidder participation totaled 41.4% -- above average -- so strong retail particpation kept prices firm into the close.

Traders await more economic data this week after the market was battered by last Friday's stronger than expected nonfarm payroll increase. Goldman Sachs expects a much more moderate payroll gains of around 150,000, with perhaps a smaller increase in April to compensate for the one-off factors seen in March. and, Goldman says, such numbers would likely keep Fed officials from tightening monetary policy until 2005. Fed funds futures have priced in quarter-point rate hike by August.

Tomorrow: Import/export numbers and consumer-credit data will be released.

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