Wholesale selling of Treasuries resumed Tuesday following a brief corrective bounce on weaker-than-expected consumer confidence. Prices had begun to rebound ahead of the data on the whisper of a lower (82) confidence number, but the fact was even worse than fiction.
Consumer confidence tumbled to 76.6 in July from its post-war bounce to 83.5 in June, with its various component indices also slipping. The coupon curve remained steep and the bond surged a half point on the data, but duration-related selling jumped on the price recovery and stamped out its embers before it could catch fire.
On the bearish side, Dallas Fed's McTeer said he didn't expect the Fed to deploy any unconventional policy ammunition. A Washington Post article suggesting that Al Qaeda was planning to resume targeting commercial airliners for hijacking was largely offset by rumors of the imminent capture of Saddam Hussein.
Stocks shed gains as well, finishing in the red, but the September bond closed 1-8/32 lower at 107-01. The curve steepened thanks to outperformance at the front-end, and largely held that profile into the close. The 2-year note and 30-year bond spread widened 3 basis points to +364 basis points. Agency and swap spreads widened on reputed central bank selling.