Treasuries Slip in Lackluster Trade

Profit-taking, and equity gains after Friday's losses, pressured Treasuries slightly

The long bond closed down a half point in a very quiet, lethargic Monday session. Profit taking after Friday's strong gains, and modest improvement in equities after Friday's losses, pressured Treasuries slightly. However, the lack of news and interest kept bonds, stocks and the U.S. dollar tightly confined.

With no data Monday, and no key economic figures scheduled for release until Thursday, there was little upon which to focus. A curve steepening trade was still in evidence, though, as the short end continued to benefit from expectations of an intermeeting Fed rate cut. But the April Fed funds futures contract sold off late in the day as the presumed window for a Fed rate cut went by the wayside.

T-bills were also helped by expectations of huge reinvestment demand given the nearly $110 billion in short dated bills coming due over the next two weeks. Indeed, despite low award yields on the bill auction, results were decent. It was also a yawner for the U.S. dollar, though the dollar-yen maintained a decent bid given renewed disappointment over Japan's stimulus measures, while uncertainty over The European Central Bank's policy restrained the euro.

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