Bonds Retreat as Stock Market Charges Ahead

Treasury Secretary O'Neill refuted recession talk, telling long-term stock investors to hang in

A rebound in global equity sentiment on Friday cooled the ardor for relatively safe Treasuries, taking a slightly higher toll on the front end of the curve where cash had been parked since the "underwhelming" Fed cut on Tuesday.

Another dollop of corporate issuance priced and proposed in the middle of the curve also saturated the market. The 2s/30s spread narrowed to +107 basis points from +109 basis points over the session. The June bond came a long way of its 107-08 contract high Thursday, but found repeated demand ahead of 106-00 "psych" support after a couple brief feints by stocks into the red.

All three major indices have not collectively closed in the green on a Friday since Dec-22-00, which was quite a feat today. Though investor sentiment still remains too bullish for a sure end to the carnage, at least that was one positive sign, though the strong dollar and other earnings headwinds have not yet shifted. Some time decay selling on volume was noted ahead of the weekend. Treasury Sec. O'Neill said he was assured by the Fed that we're not in a recession, telling antsy long-term stock investors "not to pull up their turnips too often."